Chipotle’s order-head drive-thrus have been such a success, the fast-casual chain is going all-in on them, pivoting its real estate strategy to triple the number of its “Chipotlanes” by the end of the year, company executives said Tuesday.
The popularity of Chipotle’s drive-thrus, coupled with the success of the chain’s recent carne asada LTO, propelled the Newport Beach, Calif.-based chain to impressive growth for its third quarter ended Sept. 30. The company saw same-store sales climb 11%, with a 7.5% jump in traffic—its seventh consecutive quarter of same-store sales growth. Total revenue increased 14.6% to $1.4 billion.
What’s more, digital sales grew 87.9% during the period, to $257 million, and now make up 18.3% of total sales.
But among the bright spots comes some uncertainty for the company, prompting its stock price to fall about 5% in early trading Wednesday.
Building stores with Chipotlanes takes extra time, which means some new store openings may be delayed until next year, executives told analysts during a conference call late Tuesday. Chipotle currently has 80 units under construction, with more than half slated to include Chipotlanes, which will bring its total number of drive-thrus to 60 by the end of 2019. The chain expects its total openings for 2019 to fall at or slightly below its expected range of 140 to 155 new units. In 2020, Chipotle is slated to open between 150 and 165 new stores, with more than half featuring drive-thrus.
Chipotle’s drive-thrus are innovative in the industry, requiring consumers to first place an order via the chain’s app or website to schedule a pickup time at the Chipotlane pickup window.
Also adding to a bit of uncertainty for Chipotle is its dwindling supply of carne asada. Inventory of the premium menu item is expected to run out by the end of November or early December, according to company executives.
The chain is working to source more carne asada that would meet its rigorous supply chain standards, CEO Brian Niccol told analysts.
“It’s something we’re going to work on going forward, given the response we’ve seen. … How do we work on the supply of steak in that particular cut to be consistent with our ‘Food With Integrity’ principles to give us the flexibility to do it beyond just the seasonal program?” Niccol said, according to a transcript from financial services site Sentieo.
Chipotle is also testing queso blanco, salads and quesadillas, Niccol said.
“These items are in various markets where we’re gaining valuable feedback,” he said. “We’re not going to roll out new menu items at the sacrifice of throughput, nor will we add complexity to our restaurants by overemphasizing new menu choices.”
Another potential area of growth for Chipotle centers on its rewards program, which launched in March and currently has 7 million members.
The chain has “only scratched the surface” on creating targeted marketing for its most loyal rewards customers, Niccol said.
“We are encouraged by early signs of transaction increases across all frequency bands,” he said. “And, going forward, we’ll double down on our ability to leverage this data to incent behaviors. We expect this lever to become a bigger driver over time as we gain more experience gathering customer insight while continuing to expand our digital platform.”