Chipotle Mexican Grill provided insight into the post-pandemic future of its brand this week, noting its digital business continues to surge even as dining rooms reopen.
In releasing its first quarter earnings, Chipotle said digital sales made up 50.1% of all transactions, growing nearly 134% for the period ended March 31. Meanwhile, the Newport Beach, Calif.-based chain reported it had recovered about 60% of its on-premise sales as dining rooms reopen.
“I’m still optimistic about our dining rooms reopening because it’s not cannibalizing from our digital business,” CEO Brian Niccol told analysts late Wednesday. “These are really two distinct occasions.”
Running what are essentially two restaurant operations out of one space is complex. So, Restaurant Business sat down (virtually) with Chipotle Chief Restaurant Officer Scott Boatwright just after the chain’s earnings release Wednesday to find out whether the burrito brand is nearing max capacity.
Here’s what Boatwright had to say about Chipotle’s operational capacity, its tech investments, why he was initially anti-quesadilla and more:
- With digital orders going strong and dining rooms reopening, is Chipotle feeling any operational stress? Are restaurants reaching max capacity? In short, Boatwright said it’s not even close. The chain is currently seeing average unit volumes of about $2.27 million, with $2.4 million AUVs forecasted for Q2. Installing separate makelines for digital orders several years ago has allowed the chain to keep up with the swift growth, he said. “The capacity, while not limitless, we are not anywhere near capacity,” he said. He added, though, that Chipotle does throttle its digital business at peak times.
- Chipotle launched quesadillas systemwide early last month, its first new build-your-own entree on the menu since salads were added nearly 20 years ago. Quesadillas, which are cooked in custom ovens, are only available for digital orders. The rollout has been successful, Niccol said, with about 10% of all orders including quesadillas—many of them coming from brand-new Chipotle customers. But Boatwright, initially, was not pro-quesadilla. “I’m an operator at heart,” he said. “I’ve been in this industry almost 30 years.” At first, during the initial tests, quesadillas were available for dine-in customers as well as digital orders. “It just didn’t work,” Boatwright said. “(Workers) were running around with their hair on fire. Moving it over to digital-only was the right decision.” What’s more, Chipotle is seeing some nice ticket boosts with the quesadilla as diners add on guacamole and, yes, even queso with the cheese-filled item. “Which surprised me,” he said. “There’s nothing like melted cheese dipped in more melted cheese.” Currently, Chipotle’s test kitchen is looking for other ways to leverage those custom ovens, including potential dessert offerings—the second-most requested menu addition for the chain (behind quesadillas).
- Around the country, restaurant operators large and small say hiring is a major challenge. How is Chipotle faring? The chain held a national hiring day early in the year to try to be proactive as dining rooms were reopening, Boatwright said. “We have pockets around the country that are struggling with applicant flow,” he said. The chain is using recruiters to funnel applicants into restaurants and is “thinking through” what any sort of recruitment incentives might look like, he said.
- Last month, Chipotle announced an investment in self-driving, robotic delivery company Nuro. What will that partnership look like and might Chipotle make more tech investments? “We’re in the super early stages of that partnership,” he said. “But they’re an innovation company and we’re an innovation company. It seems like a natural fit for us.” And the chain likely won’t stop with Nuro. Chipotle is always on the lookout for other “strategic opportunities” to invest in, Boatwright added.
- Currently, Chipotle has 21 million members in its loyalty program—about 60% of whom are active and ongoing, the company said. What is the chain doing to boost engagement among those rewards members? “The goal is to move beyond the transaction,” Boatwright said. He said that Chipotle’s app was inspired by the frictionless style of Amazon’s interface, combined with the customizable options of Nike’s digital products. Chipotle is currently eyeing other ways to bridge that relationship between the consumer and the brand, he said. Several enhancements to the rewards program are planned for later this year to boost engagement and purchases.
- Chipotle is bullish on its high-margin Chipotlanes. Currently, 196 of the chain’s roughly 2,800 restaurants have the order ahead-pickup lanes. About 70% of the 200 restaurants slated to open this year will include them. Is it difficult to find drive-thru friendly real estate? “A lot of real estate opened up, unfortunately, due to the pandemic,” Boatwright said. But it can be a challenge to find endcap or freestanding real estate options for Chipotlanes, especially in major metro areas and on the coasts, he said. So, Chipotle is getting creative. In Chicago, for example, the chain recently opened a walk-up window near Wrigley Field. “We’ll look for those opportunities in major metros where we can’t have a Chipotlane,” Boatwright said.
Update: This story has been updated to correct Scott Boatwright's title to chief restaurant officer.
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