How serious should we take a Starbucks-Chipotle combo?

When the publication Semafor published speculation that Starbucks could buy Chipotle, we did not take it seriously. Our first instinct, however, was to laugh uproariously.

And then the Financial Times said that Starbucks did, in fact, talk with advisors on that very subject, and the report blew up on social media and in many publications. The company’s lack of a true denial didn’t exactly discourage anything. And we still haven’t heard from Chipotle on this.

UPDATE: We can dispense with the speculation now as Starbucks has officially denied that it is buying Chipotle, with this far more decisive comment: "I can confirm for you we are not buying Chipotle."

Doubt on such a deal was pervasive among the analyst and investing communities. And we’ve heard from multiple people with considerable experience buying stuff who also doubted this happens. It would be too expensive a deal, and the payoff for Starbucks just isn’t all that clear.

Crazy deals get broached all the time. Investment bankers have fees to earn, and they approach companies with ideas for combinations that often seem outlandish. We wonder if this happened here. At the very least, this was a discussion topic before the Financial Times report, enough that Semafor published something about it. “The bankers are like a sewing circle,” one person said.

But there’s also the matter of Chipotle’s valuation. Since Brian Niccol left the fast-casual chain for Starbucks, Chipotle’s stock has fallen 45%, a level not seen since the E. coli days. The company needs a stock boost, and got it with that report. But its valuation has also fallen enough that an acquisition is at least within the realm of reason.

That’s saying a lot. Chipotle’s pre-report multiple, at 19 times EBITDA, or earnings before interest, taxes, depreciation, and amortization, remains relatively costly. But that’s enough that at least some potential buyers might be wondering whether it’s worth the shot.

Because Chipotle remains a phenomenal brand that would absolutely be worth paying a premium for, no matter how bad the past two years have been.

We took a hard look at the $200 million kickback scheme allegedly orchestrated by the founder and longtime CEO of Subway’s purchasing co-op. It involved a lot of the same strategies deployed by franchisors all the time. This one was just in secret.

MTY Group might put its underperforming brands on the market which, taken at face value, would mean it could sell most of its U.S. concepts.

We’re seeing lot more of this sort of thing: True Food Kitchen, which declared bankruptcy last week, took a lot of advances on its sales.

Brandon Solano and the Rave Restaurant Group board of directors are apparently not simpatico. Neither are Pie Five and customers.

In honor of the alleged Starbucks-Chipotle proposal, here are the largest restaurant deals of all time, adjusted for inflation. A Starbucks-Chipotle deal would be three times the biggest on this list.

“As a matter of policy, we don’t comment on rumors and speculation. Our team is laser-focused on executing our ‘Back to Starbucks’ strategy.” Yes, I made Starbucks’ rather generic response to the Chipotle acquisition report the quote of the week. Congratulations, unnamed Starbucks spokesperson, who has since officially said they are not buying Chipotle. Ah well, it was fun while it lasted.

On A Deeper Dive I spoke with Anil Yadav and Noah Chillingworth on the post-Jack in the Box Del Taco. On The Week in Restaurants we talked Subway, Starbucks, True Food, and Souplantation.

For questions, comments or story ideas, send me an email at jonathan.maze@informa.com. And follow me on Twitter at @jonathanmaze. And also LinkedIn. And TikTok.