Chipotle Mexican Grill triggered a whiplash epidemic yesterday when it posted a same-store sales increase of 17.3 percent for the second quarter, turning the heads of chain peers who’d be happy with any positive number. (Executives of Taco Bell’s parent company were crowing last week about a two-point rise.)
So, how’d the now-1700-unit chain do it?
Executives stressed in a conference call yesterday with analysts that the results were the fruition of a food and employee focus that extend back to the brand’s earliest days. As they explained, prompting consumers to think about the origin and handling of their food gives Chipotle an immediate advantage, given how much effort it puts into sourcing from sustainable sources.
For instance, co-CEO and founder Steve Ells revealed that the chain is now importing beef from Australia because the norm there is to raise cattle solely on grass, a ranching method regarded as better for the animals, the beef eater and the environment.
Chipotle would prefer to buy locally, but not enough grass-feed cattle are raised in the United States, Ells explained. And even with the Australian supplements, the chain sometimes has to resort to conventionally raised beef. When it does, units post a sign to inform customers of the temporary change.
Although executives stressed culture as a reason for their expectation that comps can stay in the mid-teen range, they did cite a number of other factors for the second-quarter sales leap.
A continued emphasis on moving more customers through the line at peak times resulted in eight more transactions per hour during both the lunch and dinner rushes. Overall, the number of transactions rose year-over-year by 9.4 percent at lunch and 13.3 percent at dinner.
A push for more off-site group business raised catering sales to 1.6 percent of total intake, from a level of 0.3 percent just a year earlier. Units that have offered catering for more than a year enjoyed about a 2 percent contribution to sales from catering, signaling future growth as awareness of the service spreads in local markets.
The average tab at Chipotle rose 5 percent year-over-year, buoyed by two and a half percentage points from a price increase. In addition, Chipotle is now pushing guacamole and chips as an add-on side dish to its burritos and bowls.
Variable pricing increases
Executives revealed that steak prices are running about 9 percent over the cost of a year ago, while chicken prices were increased only 5 percent. Consumers traded down but didn’t abandon the concept, they indicated.
The ratio of stores to field-level supervisors has been lowered.
Executives also noted that Chipotle is expanding at a strong clip. With 45 units opened during the quarter, the all-company-operated chain had 89 more stores in operation than it did at the same time a year ago.
The new stores are being seeded with promising employees identified through Chipotle’s Restaurateur program, which rewards general managers handsomely for identifying and cultivating staffers who might be capable of growing into managers.