Chipotle Mexican Grill, which has no debt and more than $900 million in cash on hand, said Tuesday it expects to be able to take advantage of newly available real estate from shuttered retail locations once the immediate coronavirus crisis has passed.
What’s more, the fast-casual Mexican chain noted that once-resistant landlords are becoming more amenable to allowing drive-thrus, which the company calls Chipotlanes.
“Our new unit development pipeline is continuing to build as we remain confident about the long-term opportunity to more than double the Chipotle restaurants in the U.S., and we’re already beginning to see an increase in sites available as other businesses have pulled back,” CFO Jack Hartung said during a conference call with analysts to release the company’s Q1 earnings.
Chipotle reported that same-store sales in March fell 16% due to the effects of COVID-19, though for the full quarter ended March 31, same-store sales grew 3.3%. At their lowest, comps fell 35% during the week ending March 29. In the past week, sales have been down “in the high teens,” the company said.
The 2,638-unit chain has temporarily closed 100 stores, largely in now-shuttered malls and in several countries in Europe.
With dining rooms closed systemwide to slow the spread of the virus, the Newport Beach, Calif.-based chain has shifted focus to digital channels.
Chipotle’s digital sales more than doubled and made up 37.6% of sales in March. The chain’s rewards program membership grew from 8 million to 11.5 million members, with 65% of those new rewards members also being completely new Chipotle customers, up from 51% before the coronavirus.
“That’s going to be a very valuable asset,” CEO Brian Niccol said.
The chain intends to open even more stores with drive-thru pickup lanes going forward, with as many as 70% of new units featuring a Chipotlane in the future. The drive-thrus have proven to provide higher-margin transactions for the chain and are a draw for consumers seeking minimal contact and convenience during the COVID-19 pandemic.
“It was a wild card for us,” Chipotle COO Scott Boatwright told Restaurant Business about the chain’s decision to add drive-thrus. “A couple of years ago, when we started thinking of this program, it was born out of the idea of convenience. We didn’t want to go down the route of the traditional drive-thru.”
Boatwright is part of a companywide coronavirus task force that has met daily for the past couple of months. The group is discussing what reopening will look like once state and local governments allow dining rooms to open again.
All Chipotle employees are wearing masks and gloves, and a worker will be deployed to the dining area to keep up with sanitation, Boatwright said. Social distancing marks are placed on the floor to aid customers and delivery drivers.
The chain is still “working to understand” what reopening will mean for drink stations, communal serviceware and other high-touch areas, he said. It’s also unclear what will be required of dine-in seating.
“The biggest challenge overall is really dealing with the one-off requirements or mandates from local municipalities or states or national regulations,” Boatwright said. “Ensuring that we’re getting those mandates in real time and that we’re responding appropriately in every restaurant. When we have such a large national footprint, things can change and change by the moment.”