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Chipotle rolls out its first ghost kitchen

The Chipotle Digital Kitchen, which debuts this week in New York, will give the fast-casual chain greater flexibility to expand in dense urban areas, the company said.
Photo courtesy Chipotle

Chipotle Mexican Grill is opening its first digital-only restaurant to cater solely to delivery and pickup orders as those channels grow in popularity amid the pandemic, the chain announced Wednesday.

The Chipotle Digital Kitchen is slated to open this Saturday in Highland Falls, N.Y., the chain’s first unit without a dining room or guest-facing makeline. All orders at the digital restaurant must be placed in advance via the chain’s website, app, or third-party delivery platforms.

Chipotle says the new store format will give the chain greater flexibility to expand into urban areas that wouldn’t support a full-sized restaurant.

Orders are picked up in the unit’s lobby by customers or delivery drivers.

The Digital Kitchen will also fulfill large catering orders, which will be available for pickup in a separate lobby with its own entrance, the chain said.

“The Digital Kitchen incorporates innovative features that will complement our rapidly growing digital business, while delivering a convenient and frictionless experience for our guests,” said Curt Garner, Chipotle’s chief technology officer, in a statement. “With digital sales tripling year-over-year last quarter, consumers are demanding more digital access than ever before so we’re constantly exploring new ways to enhance the experience for our guests.”

Chipotle

Digital growth has been a huge bright spot for the Newport Beach, Calif.-based fast casual. Chipotle reported last month that digital orders now make up nearly half of all of its sales. Digital sales grew 202.5% year-over-year in Q3 to $776.4 million.

About half of those digital orders have been for delivery, with the rest for in-store pickup and order-ahead Chipotlane drive-thru transactions, the company said last month.

Delivery has been so significant for Chipotle that the fees have started eating into the chain’s margins, falling from 20.8% last year to 19.5% during the quarter ended Sept. 30.

With digital orders increasing, the chain is working to convince customers to order through other channels, including Chipotlanes and pickup, while also testing price increases on food ordered for delivery.

The pandemic has accelerated the growth of delivery-only ghost kitchens around the country, with many brands moving into the space to capture off-premise business.

Earlier this month, Reef Technology, which turns parking lots into ghost kitchens, announced it had received a $700 million investment.

Before the coronavirus crisis, an estimated 15% of operators reported using a ghost kitchen, according to Restaurant Business sister company Technomic and the National Restaurant Association. Several months into the pandemic, however, 51% of operators said they were using ghost kitchens for some or all of their delivery orders.

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