Deal of the week: Could a 'Burrito bond' be a spicy investment for your portfolio?

11 October 2018

Investors looking for a spicy income kicker might want to check out the launch of the ‘Burrito Bond’ from restaurant chain Chilango.

What is the deal exactly?

The Mexican restaurant chain has launched its second edition “Burrito Bond”. It requires you to invest a fixed amount, £500 minimum, for four years.

In exchange, investors should receive a fixed 8% on their money over the life of the bond, paid twice a year. The investment product is an ‘unlisted corporate bond’ often called a mini bond.

Alongside the fixed interest investors can take advantage of perks with the chain, which has restaurants across London and one in Manchester.

Why should I care?

Investors who put away £10,000 will qualify for a ‘Chilango Black Card’ entitling them to a free burrito every week for the entire four years of the bond. Other perks include:

  • Minimum investment of £500: a voucher for two free burritos and a £10 promotional code for a free burrito, delivered via Uber Eats;
  • £1,500: Chilango gift card with five meals, and those investing
  • £2,500: Chilango gift card with 10 meals
  • £5,000 or higher: Uber Eats will offer free delivery (i.e. the delivery fee will be waived) of unlimited Chilango orders for the lifetime of the Bond, and a ‘Chilango Green Card’, entitling them to free guacamole on one meal per transaction during the lifetime of the Bond.

Talking to Moneywise, co-founder and chief executive Eric Partaker says the original Burrito Bond in 2014 saw 700 people invest a total of £2 million. Around 100 investors put away £10,000, and a further 600 invested an average of £1,600.

Chilango says it has launched a second bond to raise capital to grow the business further, with plans to open new restaurants across the UK.

Chilango co-founders Eric Partaker and Dan Houghton

What’s the catch?

This investment should not be seen as a core holding to put away your life savings into, but can be an extra income kicker if you’re looking to earn a strong return over four years on a small sum as part of a much wider portfolio.

As it is an unlisted corporate bond, the risk associated is higher than with typical investments in company shares or bonds. If the company were to fail you would not get your money back. This has happened in the past with other mini bonds.

You also won’t be able to get your money back before maturity.

Other firms such as Brewdog similarly launched mini bonds, called “Equity for Punks” (named for the firm’s famous Punk Ipa). The fifth round of Brewdog’s offer was highly popular garnering nearly £25 million in investments.

If you are considering this as a genuine investment, make sure you are not being distracted by the promise of freebies and that it is the best way of growing your money.

What are my other options?

Less spicy ideas for investing include a Stocks and Shares Isa. Check the Moneywise First 50 Funds for our pick of the best investments. Like with any investment though, returns are not guaranteed.

Alternatively, a top-rate four-year savings account such as the Masthaven Bank 48 Month Flexible Term Saver will pay 2.53% interest and is much lower risk. It is also protected by the FSCS deposit insurance scheme so if the bank were to fail any money under £85,000 would be protected.

Where can I find out more?

For more information on how to invest in the Burrito Bond, visit the Chilango website.

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