Chipotle Mexican Grill’s digital investments are paying off.
“…Our digital platform has been a big beneficiary of the current environment." Digital sales increased 216% year-over-year to $829 million, "which is by far our highest ever quarterly level and represented 61% of sales,” said CEO Brian Niccol in an earnings call with analysts.
Chipotle reported financial results for its second quarter ended June 30, 2020. During Q2 revenue decreased 4.8% to $1.4 billion, and comparable restaurant sales decreased 9.8%. A full earnings report is available here.
White Label vs. Third-Party
For Chipotle, third-party delivery has been a boon. “Partnering with all the major third-party delivery aggregators has led to an increase in orders, a reduction in delivery time and cancellations and an improvement in overall customer ratings,” Niccol said.
However, that doesn’t mean the brand isn’t trying to win customers over to their mobile app and rewards program. Currently, delivery orders are evenly split between marketplace and Chipotle’s app. “… We can run very targeted efforts within our app into our rewards customers to incentivize them to stay within our app for that delivery occasion. …We can control more of the variables on delivery fees as well as menu prices, so that we can also incentivize behaviors towards our app as well,” Niccol explained. Customers ordering through Chipotle’s app also earn rewards. “So, we are feeling really good about the growth that we have seen in our white label business and continues to be an access point that we are going to continue to drive, because it does still appear to be a unique occasion,” he added.
Digital Order Ahead Soars
Even as dining rooms reopen, Chipotle continues “to see strong digital sales momentum in July, with a mix of nearly 50%.” More than half is coming from order-ahead and pickup transactions, while the remainder is coming from delivery, explained Niccol.
“Order-ahead is now our fastest grower due partly to being less promotional on delivery, partly to more customers realizing the value of a pickup transaction, as are no delivery fees, and to a lesser extent, more Chipotles. With free-delivery promotions likely to be less frequent moving forward and as pivoting more aggressively towards Chipotles, we are optimistic that the order-ahead transaction will continue to be a big driver of future growth, which should benefit both sales and margins.”
Demand for Digital Drive-Thru
The brand recently announced its 100th location with a Chipotane. Locations with the drive-thru for digital order pickup, or Chipotlanes, have higher sales. CFO Jack Hartung said Q2 same-store sales “are over 10% higher than the non-Chipotlane comp restaurants … while the more recent openings during COVID are actually 30% higher.”
With such great results, 60% of Chipotle’s new stores opening this year will have drive-thru, and the goal is to exceed 70% in 2021, Hartung added.
Enrollment in the brand’s loyalty program continues to skyrocket, and is approaching 15 million members.
“The rate of enrollment has roughly doubled during the COVID crisis as customers flocked to Chipotle’s digital ordering channels,” Niccol said about the 15-month-old program.
“Today, the question I hear most frequently is how are we going to benefit from this? Interestingly, even in the early stages of utilizing the customer data, we are seeing a significantly higher frequency of transactions from members versus non-members.
“Its early days, but we are starting to leverage this growing installed base with personalized promotions to incent behaviors, especially considering more than 70% of current digital orders are from our members. We are also using this tool to help make our digital platform stickier by reengaging customers if their usage drops,” Niccol said.
All digital orders from Chipotle are fulfilled via the digital kitchens, which are comprised of a dedicated make-line and operated by a special team in nearly all Chipotle locations. Recent digital investments include Pepper, its concierge chatbot on Facebook Messenger, and expanding its digital capabilities into Canada.
The brand has made investments “in our people and the Chipotle business, which are not only helping us manage through this crisis, but set us up for a strong recovery and future,” Niccol said, adding that the “top priorities for the rest of the year include safely running our restaurants and reopening dining rooms, using best practices to support alternative restaurant support center working arrangements, ensuring supply chain consistency and strengthening our digital ecosystem.”
Food Safety & Sanitation Steward
HT previously detailed the brand’s food safety protocols; and the brand has created a new position: a steward who is focused on sanitizing high-touch and high traffic areas. The fast casual brand is providing mats for all employees and uses a tamper-evident packaging seal for all digital orders.
“These initiatives give our employees and guests confidence that Chipotle remains steadfast in our commitment to keeping them safe, especially now that the dining rooms are starting to reopen.”