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Chipotle to Focus on Upgrading the Digital Guest Experience in 2018

During Chipotle Mexican Grill, Inc.'s Q4 2017 earnings call, Steve Ells, CEO and Founder of the restaurant brand, spoke about how the company will be focusing on improving the guest experience in 2018 with innovations in digital technologies.

"Over the last year, we've been building new competencies around improving the guest experience through technology and testing new or enhanced offerings. Each of these is designed to improve convenience, add interest to our menu, and deliver a better overall experience for our guests," he noted.

One reason for this emphasis is that digital sales have continued to be the fastest growing part of its business. The company hit new records in the fourth quarter of 2017 with its second make-line sales up 33% over the prior year. In particular, guests are increasingly ordering Chipotle food through digital platforms. The brand's digital sales mix was 8.6% of sales on average. The growth has been led by mobile ordering, which is up 50% over last year.

According to Ells, the increase in mobile ordering has been driven by the newest version of its mobile app. The app's new features include quick reorder of favorite or recent orders and the ability to receive, store, and redeem offers. The app also introduces new mobile pay options, a more user-friendly store locator, and a streamlined user experience with enhanced design, and guest response has been consistently positive since the launch. For instance, average monthly users on mobile have more than doubled since the release of the app.

With the increase in online ordering, the company has seen the need to redesign the restaurants. In particular, it is rolling out a second make-line to reduce in-store guest wait times as well as optimizing its Smarter Pickup Times. According to Ells, in 2018, the company will accelerate the rollout of its digitally enable second make-lines. Chipotle expects that at least 30% or 1,000 of its restaurants will be outfitted with these new second make-lines by the end of 2018 and that it will invest about $45 million to do so. It is currently prioritizing locations that currently have the highest digital sales volumes to install these new make-lines.

Additionally, Chipotle will invest about $15 million to improve IT infrastructure, a portion of which will support and enhance its digital programs and digital experience, said John Hartung, CFO.

"Our digital investments are targeted toward the fastest growing piece of our business, and will be accompanied by other digital-experience enhancements and focused marketing efforts to continue to encourage digital ordering," he added.

During the Q&A portion of the call, Chipotle was asked about its launch of a loyalty program. Mark Crumpacker, Chief Marketing and Strategy Officer, said that while the company wouldn't comment on specifics, it is expecting to launch a loyalty program as part of a larger CRM effort in the second half of the year.

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