Do you want some bonds with your burrito?
A Mexican restaurant chain in London is taking a novel approach to debt financing that could help build customer loyalty as well.
Chilango has issued "burrito bonds"-- four-year, small denomination bonds that pay an 8% annual interest plus burritos.
"We're not just raising money to finance our next batch of restaurants," says cofounder Eric Partaker. "By doing this we have just created over 600 Chilango brand ambassadors throughout the city of London." Those investors, in turn, get "a chance to directly participate in the business that...they helped build," adds Partaker.
Investors have until Tuesday to participate in the bond offering, which is taking place on a crowd funding platform -- the first for a mini bond offering.
"We launched on June 10 [with] a million-pound target," says Partaker. "Smashed through that in just 19 days...and we're knocking on 2 million pounds just now." (which is equivalent to about $3.3 million dollars).
That's not so surprising given the relatively high interest rate, which is about double the rate on U.K. high yield corporate bonds. Those willing to shell out 10,000 pounds receive a Chilango Black Card, which entitles them to one free meal per week. The company says it has 90 black cardholders so far, and the average investment is about 3,000 pounds ($4,690).
Given the popularity of this offering, will Chilango issue more burrito bonds?
"We would definitely consider this route again," says Partaker. But first he wants to deploy the money raised so far to open three more restaurants. The company currently has seven restaurants operating in London.
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