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Chipotle reveals its next steps

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After sales fell back to earth in the third quarter, Chipotle Mexican Grill is launching into several initiatives to strengthen connections with customers and boost throughput, a prime objective of the chain for the last year. Here are four of the moves, as revealed by management during a conference call yesterday with investors:

Maximize the little-known ‘restaurant within a restaurant.’ 

Co-CEO Monty Moran explained that each Chipotle has a little-known second production line, a scaled-down version of the prep line customers walk along as their order is being prepared. The “second make line,” as Moran called it, is used for orders consumed off-premise. The plan calls for getting more than the $500 in daily sales that units currently average from the line, a goal that pivots on an every-store employee called the takeout specialist. His partner in the corner office, co-CEO Steve Ells, acknowledged that the second line will need some retrofitting, including the installation of some type of kitchen display system.

Adopt a digital order-ahead-and-pay service for delivered catering.

It’s a multifaceted effort. Tech-wise, the chain will focus on app and online enhancements that facilitate service for all takeout and delivery customers, explained Chief Creative and Development Officer Mark Crumpacker.  Longer range, Chipotle plans to set up delivery for catering orders that can serve up to 200 people.  Crumpacker said the company plans to use a third-party service, and will begin tests in late 2016. Chipotle’s smartphone app already enables customers to pre-order a meal, but Ells acknowledged that the chain has yet to promote the capability.

Continue to slowly expand the company’s secondary brands. 

A second branch of Pizzeria Locale, Chipotle’s entrant in the fast-casual pizza segment, is now open in Kansas City, and two more units are under development in Cincinnati.  Meanwhile, the store count for Shophouse Southeast Asian Kitchen is now in double digits. An eleventh outlet of the fast-casual Asian chain recently fired up its grills in Los Angeles, which now has four stores, and two are opening near-term in Chicago. “They're still in the nurturing phase, it's still in the brand building phase,” commented CFO Jack Hartung.

Tweak Chipotle’s Halloween promotion to twist competitors’ tails. 

Traditionally, customers who dress as burritos when visiting stores on Oct. 31 are offered a burrito at a discounted price of roughly half the usual charge. This year, to amplify the chain’s claimed distinction of having fewer additives in its food, the costumes have to include one unnecessary element. The requirement drives home the point that such nonessential ingredients aren’t among the 68 items that Chipotle uses, in total, to produce its whole product line, management explained.

For the third quarter, Chipotle reported a comparable-store sales increase of 2.6 percent and a revenue rise of 12 percent, to $1.2 billion.

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