Chipotle to Double Digital Pickup Lanes
2019 was a banner year for Chipotle Mexican Grill, and Q4 marked the eighth consecutive quarter of “accelerating” comparable sales, “which highlights that running great restaurants with the right leaders and the right culture delivers outstanding performance,” said CEO Brian Niccol in a Q4 and fiscal year-end 2019 earnings call with analysts.
Double Digit Growth
For the quarter, Chipotle reported sales of $1.4 billion, representing 17.6% year-over-year growth, which was fueled by 13.4% comparable restaurant sales growth that included 8% transactions growth. Restaurant level margins of 19.2% -- an impressive 220 basis points higher than last year.
For fiscal 2019, sales jumped 14.8% to reach $5.6 billion, driven by an 11.1% comp with 7% transaction growth. A full earnings report is available here.
Chipotle's 5 Key Fundamental Strategies
1. Make the brand more visible and loved.
2. Create innovations utilizing a stage gate process.
3. Leverage digital make line to expand access and convenience.
4. Engage with customers through loyalty program.
5. Run successful restaurants with a strong culture that provides great food, hospitality, throughput and economics.
The fast casual brand continues to reap the benefits of marketing. About 3% of its sales are earmarked for its marketing budget, a percentage that has remained consistent for a few years, said Niccol.
“There's no doubt that marketing helped drive impressive sales during 2019. And based on the plans we have in place, I expect more of the same in 2020,” explained Niccol. “Chipotle will continue to have a presence in national media where and when it makes sense. We will be a part of culturally relevant events and we have an always-on social and digital program.”
Chipotle’s digital program -- “designed to reduce friction while increasing convenient access” – is a bright star for the QSR.
During 2019, Chipotle made good on its promise to roll out digital pickup shelves, digitizing its second, and digital, make line, and expanding its delivery capabilities to 98% of its stores.
Digital sales rang up at $282 million, growing 78% year-over-year and represented 19.6% of mix for Q$. “In just three years, we have quadrupled the digital business, achieving over $1 billion in sales during 2019,” said Niccol.
This year Chipotle will more than double the number of Chipotlanes, its digital pickup lanes, in its digital flywheel. “Our guests love the convenience and it strengthens our economic model by making our highest margin channel more accessible,” said Niccol.
During Q4, 46 Chipotlanes came online, resulting in 66 Chipotlanes at year-end. For 2020, 150 to 165 new restaurants are planned, with more than half including a Chipotlane.
New Store Design
A drive-thru is not the only change planned for its brick-and-mortar locations. Chipotle is testing a new restaurant design that evolves the mobile pickup shelves to an integrated digital pickup portal. Chipotle recently began testing several formats including one with a walk-up window across from Wrigley Field in Chicago. “This 2,000 square-foot restaurant is slightly smaller, has fewer seats, the customer-facing grab-and-go beverage case and digital pickup shelves near the front door for easy access,” Niccol explained. “By better suiting our restaurants to accommodate the digital business, we will be able to provide a better overall experience for our guests.”
This year, Niccol explained, will be about using all its digital tools, including leveraging its 8.5 million members strong rewards program as it looks “to optimize the use of database marketing to incent behaviors as we build out our CRM capabilities.”
The brand too has begun leveraging insights from its loyalty program to push personalized offers. “We're kind of rolling right now with it,” said Niccol “So, it's going to be happening all year long, and I think as every week goes by, we're only going to get better at it.”