Chipotle Turns Down Free Rent East of the River

by Mark Wellborn

Apparently, Chipotle is too good for a rent-free lease.

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The City Paper’s new intrepid real estate reporter Lydia DePillis tipped us off to the news that the wildly popular burrito chain turned down an offer to operate rent-free on the ground floor of The Grays on Pennsylvania, a new 118-unit apartment building in the Southeast DC neighborhood of Fairlawn.

The news, which was part of Jonathan O’Connell’s very good story on efforts to bring organic grocery stores to low-income areas of DC, is a pretty loud slap in the face to neighborhoods east of the Anacostia River. Other than the food itself, rent is probably the biggest overhead expense, so the neighborhood likely factored significantly into Chipotle’s decision. Even though it is one of the most popular fast food chains in the country, Chipotle’s only DC stores are in the NW quadrant of the city.

Aside from this little piece of information, O’Connell’s story is an informational read about the efforts of a local developer and the owner of a number of Yes! Organic stores in DC to bring organic groceries to low-income areas. (Yes! will occupy the ground floor retail space at the Grays on Pennsylvania.)

This article originally published at http://dc.urbanturf.com/articles/blog/chipotle_turns_down_free_rent_east_of_the_river/2055

21 Comments

  1. Laura said at 2:58 pm on Monday May 10, 2010:

    Wow - that’s pretty obnoxious, and patently ridiculous.  Kind of makes me never want to eat at any Chipotle again.  But major kudos to Yes! Organic Market for expanding into underserved areas.

  1. former Georgetowner said at 3:24 pm on Monday May 10, 2010:

    why is it obnoxious?  if it doesn’t make business sense?  most chipotles make their money during the 2-3 hour lunch crowd. 

    even if it’s free rent for a year, how much is insurance for a place like this?

  1. Alito said at 3:59 pm on Monday May 10, 2010:

    Why wouldn’t it make business sense? No rent means, as the article stated, that the only overhead would be food (and employees). And the current food options over there are pretty limited. They would do killer business.

  1. KAS said at 9:58 am on Tuesday May 11, 2010:

    Rent free for how long? I’m sure the deal wasn’t forever then they had to factor in the REAL costs of operating in the neighbourhood. I’m sure they weighed in all the pros and cons.

  1. JJ said at 10:54 am on Tuesday May 11, 2010:

    I am sure they turned it down because of liability reasons and PR stipulations, there is a reason why they only have stores in the NW quadrant of D.C. I also imagine rent in that area is not that expensive to being with and Chipotle being a giant money machine in the restaurant business felt the risk analysis did not outweigh the reward.

  1. Mr. Galt said at 10:58 am on Tuesday May 11, 2010:

    My father in law had a shop in that neighborhood and had to sleep on the floor at night because it would get broken into so often.  If fear and risk tolerance are not a part of your business model you should be free to say no and operate where you think makes most sense to your business i.e. Chinatown; have you ever seen that lunch time line?

  1. hoya24 said at 11:00 am on Tuesday May 11, 2010:

    no you’re not sure they weighed in all the pros and cons. We can only speculate.  But it does seem curiously.  I would think a lot of students would eat there for lunch and right after school.  Interesting decision

  1. TigerJo said at 11:07 am on Tuesday May 11, 2010:

    While I think everyone raises valid points, it would have been nice to see Chipotle take the lead on this one.  It would add a lively and busy storefront to the neighborhood, create some jobs, and send a message that there’s more to DC than the NW.

  1. dembele said at 11:09 am on Tuesday May 11, 2010:

    How do you define ‘one of the most popular fast food chains in the country’?  Sounds like something white people like…

  1. PleasantPlainer said at 11:27 am on Tuesday May 11, 2010:

    If you want to experience true burrito heaven (Chipotle is some kind of purgatory - it’s only half way to heaven) next time your up in Boston/Cambridge check out Boca Grande. They are amazing and put Chipotle to shame. I stopped going to Chipotle as I always leave underwhelmed (and this note only gives a reason to continue NOT going. Nothing worse than a mediocre chain that’s apparently snobby to boot). Chipolte would prob sell as many dinner burritos to MD commuters leaving the city late than any lunch time crowd! But the flavor and quality/freshness of Chipotle’s burritos never match their size (why are they so tan ginormous carajo!?) or the anticipation of buritto bliss derived from those long lines. I have yet to find a place that beats Boca for the real deal.

  1. PrudenceJ said at 11:27 am on Tuesday May 11, 2010:

    I’m very sad to hear this.  There other (less healthy) food options in the area so I find it very hard to believe this decision is based on a thought that they wouldn’t have enough business traffic in the area.  I will re-evaluate MY outside dining options.

  1. star45 said at 11:36 am on Tuesday May 11, 2010:

    As a resident of the Hillcrest community, I’m disappointed in Chipotle’s decision. I think the restaurant would attract Southeast residents - many of whom are not criminals and care deeply about where they live - and those who live and work on the Hill. I do, however, understand their concerns which most likely relate to crime. Opening the restaurant would be a step in the right direction, hopefully creating positive change in the neighborhood.

  1. Sebastian said at 11:41 am on Tuesday May 11, 2010:

    Contrary to popular belief, a Chipotle’s Burrito is not the healthiest meal, it packs close to 1600 calories plus 50grms of fat.

  1. JT said at 11:42 am on Tuesday May 11, 2010:

    For a restaurant to make money they need their total occupancy costs to be 8-10% (ideally less) of gross sales.  Of the occupancy costs rent is the largest portion, but not the only cost(think Common Area Maintence or CAM, taxes, insurance, utilities, etc.).  I bet the landlord would pay the CAM in this deal, but not utilities, insurance, etc.  So, rent is not the second largest cost behind food for a restaurant.  Employees are very costly - I think typically around 30% of sales.

  1. Jay P said at 11:58 am on Tuesday May 11, 2010:

    I thought this blog was meant to be somewhat balanced.  Why does Mr. Wellborn make such a biased statement, as to say that Chipotle is “too good” for a rent-free lease?

    Perhaps it’s time to look for local real estate news elsewhere.

  1. okay said at 12:26 pm on Tuesday May 11, 2010:

    to Pleasant Plainer

    Okay. the next time I’m in Boston, I’ll certainly check out Boca Grande. 

    But as for the “quality/freshness” issue, does Boca Grande use only or mostly pasture raised chicken, pork, and beef?  My guess is not.  Chipotle does.

    And I agree that this piece is extremely biased.  “a pretty loud slap in the face to neighborhoods east of the Anacostia River”

    I don’t hang out in the ghetto either.  And if you consider that a “pretty loud slap in the face” then go ahead.

    But biased or not, this is not exactly a respectable publication, like the Economist.  It’s a blog.  It reports on things like rumors and even references other blogs, like PoP (which I don’t have a problem with).

  1. Roz said at 4:25 pm on Tuesday May 11, 2010:

    Jeez, there seem to be several flawed assumptions in that last comment. I will say that I think UT does an excellent job of reporting on various layers of real estate and community issues in the DC area, and with interests of residents at heart. It also knows how to not take itself too seriously.

  1. mona said at 6:22 pm on Tuesday May 11, 2010:

    Chipotle is owned by McDonalds so maybe they made the decision not to put it there because they would be competing with themselves. Doesn’t McDonalds have about a dozen eaterys in that area?

  1. DG Cromwell said at 7:17 am on Wednesday May 12, 2010:

    OMG, another article to get the white people perculating. it must be the girth on the foil wrapped burrito.

  1. Janson said at 11:11 am on Wednesday May 12, 2010:

    Mona, Mcdonald’s has zero ownership of Chipotle, for quick reference you can verify that here:
    http://en.wikipedia.org/wiki/Chipotle_Mexican_Grill
    Or look at the Chipotle 10-Q.

    I’m a little surprised that anyone would think that a company that focuses their brand and products on a specific demographic niche would simply chose to ignore that because of something like free rent. Besides, wouldn’t a decent locally-owned restaurant be preferable to a chain? It’s business practices aren’t terrible as far as fast food goes, but it’s still a corporate fast food company that takes local money out of the community.

    Not that I have an axe to grind (I’ll eat there if I have to), but Chipotle actually made MSNBC’s “20 Worst Foods in America.”

  1. w said at 12:54 pm on Wednesday May 12, 2010:

    I’d say ‘forget the fat and calories’ but that’s pretty much impossible. . . however, the SODIUM content is the most obscene.  At 2400 mg of sodium for a typical burrito, that puts McD and KFC to shame.

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