Chipotle may be looking for more international franchise partners to spread burritos around the globe.
In his first earnings report following the departure of former CEO Brian Niccol in August, Interim CEO Scott Boatwright on Tuesday maintained “steady as she goes” messaging, saying the strategies that have guided the brand for the past five years will remain in place.
And they continue to pay off. Chipotle’s same-store sales for the Sept. 30-ended quarter increased 6%, including a 3.3% increase in transactions, with consumers across all cohorts showing strength.
Boatwright said momentum has continued into the fourth quarter with the success of the smoked brisket limited-time offer that has performed even better than carne asada last year. A new Honey Chicken that has been in test may be next on the marketing schedule.
The big question going forward for the brand, however, is who will replace Niccol as CEO permanently.
Boatwright is believed to be a contender, and he was even asked by one analyst what he would like to be known for if he gets to drop “interim” from his title.
The response indicated Boatwright is more open to international franchising partnerships than the brand has been in the past.
“I want to give an eye towards how do we continue to push Chipotle to be more of an iconic global brand?” he said.
Boatwright said Chipotle’s success opening in the Middle East with Alshaya Group could open doors for similar partnership in other parts of the world, including Latin American and Asia.
Chipotle opened its first franchised international location in Kuwait City in April, and earlier this month the group opened the first Chipotle in Dubai, with a second coming soon.
For Alshaya Group, those Chipotle locations have become top performers within their franchise portfolio, which includes many other American restaurant brands, from Starbucks and Shake Shack, to Raising Cane’s and Texas Roadhouse.
Chipotle, meanwhile, is about to pass the 50-unit milestone in Canada, and operates another 28 units are in Europe (France, the U.K. and Germany). Those Canadian and European units are company owned, and Chipotle initially struggled with their performance.
But Boatwright said those regions are showing real progress, with Canadian Chipotle locations performing on par with their U.S. counterparts and promising results in Europe. He added that he sees potential for hundreds, if not thousands, of Chipotle locations across Western Europe over time.
In the U.S., meanwhile, Boatwright indicated Chipotle has solved its “portion size” problem. Earlier this year, fans on social media were accusing the brand of shorting them on portions.
Now, however, Boatwright said fans are taking to TikTok to show off their big burritos and bowls—though efforts to ensure guests are generously served appear to be cutting into margins, which dipped to 25.5% for the quarter, down from 26.3% a year ago.
The smoked brisket also had a higher cost, but, Boatwright said, “It’s rare to find an LTO that’s driving check, traffic and margins. This is one of them.”
Revenues in the quarter increased 13% to $2.8 billion. Net income was $387.4 million, up from $313.2 million in the third quarter a year ago.
Boatwright said Chipotle was continuing to “build muscle” in the ongoing push to improve throughput. In the third quarter, the focus was on the “expo” role—between the salsa and the cashier—which he said was key in ensuring order accuracy.
In August, the chain established that the manager on duty would be deployed to the expo position during peak periods.
“This has helped to improve the percentage of restaurants with an expo in place to over 60%, compared to just 50% last quarter,” he said. “It has also helped to drive accountability, improve communication with the guests and ensure we are properly ringing up each order.”
Chipotle is also planning to roll out new vegetable slicers, primarily for jalapenos and green peppers, to all restaurants by next summer, which will help reduce prep time, he said.
Also, dual-sided plancha grills are in test and will be rolled out to 74 restaurants by next month.
Chipotle opened 86 restaurants during the quarter, including 73 with a Chipotlane, for a total of 3,615. The chain is pushing to reach 7,000 units across North America.
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