Even as consumer discretionary spending is tightening, Chipotle Mexican Grill Inc. posted enviable Q3 2022 earnings earlier this week. In-restaurant sales increased 22.1%, while digital sales represented 37.2% of food and beverage revenue.
· Chipotle's total revenue increased 13.7% to $2.2 billion
· Comparable restaurant sales increased 7.6%
· In-restaurant sales increased 22.1%, while digital sales represented 37.2% of food and beverage revenue.
· Included in digital sales, delivery accounts for about 17% of Chipotle’s business
· Opened 43 new restaurants with 38 locations including a Chipotlane, or digital pickup lane
· Restaurant-level margin was 25.3%
· Loyalty tops 30 million members
In an earnings call with analysts, Brian Niccol, Chairman and CEO, said the fast-casual brand has seen its “lower-income consumer” reducing visits.
“Fortunately, for Chipotle, the majority of customers are from higher-income households, which continue to increase purchase frequency,” he said.
Back to Basics
"With consumer discretionary spending tightening, we are focused on running great restaurants and delivering excellent customer and employee experiences," Niccol explained.
During Q2, Chipotle rolled out an updated training program, Project Square One, which includes training around throughput, digital execution, food quality and hospitality. “We've made some progress during the quarter, but we are not where we need to be. The capabilities of our teams need to and will improve,” Niccol said.
The Common Thread
The brands’ highest volume stores have experienced managers “that understand the importance of the foundations,” Niccol explained. “As our newer restaurant employees go through the training and get more real-time reps, we believe we will see consistent improvement over time.”
During Q3, Chipotle shared updates on its latest technology pilots. Chippy, its AI kitchen assistant, has been deployed to one location after a successful test at its innovation center. At 73 locations in Ohio, Chipotle is piloting advanced location-based technology to enhance mobile app functionality and provide a seamless, convenient experience for guests.
IRL Meets the Metaverse
When it comes to limited time offers, or LTOs, Niccol said, “We remain comfortable with our cadence of one to two LTOs a year.” Its most recent LTO, Garlic Guajillo Steak, was first introduced in the Metaverse to its community on Roblox.
“Showing our ability to blend the Metaverse with real life … users could grill, season, cut and virtually taste the steak,” Niccol explained. The first 100,000 users who successfully completed the Chipotle Grill simulator received a promotional code to be redeemed at its restaurants IRL.
Menu prices increased 2-3% in about of its 700 of 3,100 restaurants to address what Niccol described as “pockets of outsized wage inflation.”
The brand continues to lean into off-premises. When it comes to new locations, 38 out of the 43 new locations have digital drive-thru lanes known as Chipotlanes.
When 2022 is in the books, about 80% of new locations will have a Chipotlane. For 2023, management is anticipating 255 to 285 new restaurant openings, "with at least 80%, including a Chipotlane," explained CFO Jack Hartung in the earnings call with analysts. "Development delays remain a headwind, including equipment and construction material shortages, construction labor challenges as well as permitting, utilities and inspection delays."