Chipotle’s Loyalty Program Explodes: COVID-19 Success Story
Enrollment in Chipotle Mexican Grill’s loyalty program has grown by 50%, boosting its ranks to almost 12 million from 8 million.
Chipotle has quickly pivoted during the COVID-19 pandemic, flexing the power of its digital platform.
Chipotle made investments towards digital and delivery designed to reduce friction while increasing access. The brand began offering free delivery March 15 and will continue to do so until early May (at least) and recently announced a partnership with UberEats to expand delivery nationwide.
It also shifted its marketing from traditional channels to more online as consumers are seeking out more digital content. Chipotle recently announced the launch of a new online competition for esports fans.
While locations continue to be closed for dine-in customers, digital sales are sustaining the business. For the month of March, digital sales grew 102.6% year-over -year and represented 37.6% of sales.
“We're seeing a lot of positive things happening in our digital business,” said CEO Brian Niccol in an earnings call with analysts.
For the quarter ending March 31, revenue increased 7.8% to $1.4 billion. Digital sales soared, growing 80.8% to account for 26.3% of sales for the quarter.
For the month of March, as the impact of the COVID-19 pandemic came into full view, the brand’s same store sales decreased 16%, according to the brand’s earning release.
Long View on Loyalty
Almost 12 million strong, the Chipotle Rewards program “is going to be a very valuable asset going forward as we work through the recovery,” Niccol said.
The brand appears to be recovering from the 2015-2018 food safety incidents that sent sales plunging. On April 21, Chipotle agreed to pay a record $25 million fine to resolve criminal charges that it served tainted food that sickened more than 1,100 people in the U.S.
Food Safety Protocols
In an earnings call with analysts, Niccol also detailed the brand’s food safety protocols.
“Over the past few years, we strengthened many of our food safety initiatives, including wellness checks done before every shift and trained nurses available to evaluate any employee who may feel ill in order to determine whether they should be excluded from work with full pay,” said Niccol. Chipotle has also “installed advanced technology air purification systems to reduce the risk of viruses, supplied sanitizer for employees and guests, mandated handwashing between tasks and at least every hour as well as gloves being worn for all tasks, enhanced food preparation and food handling practices designed to reduce food safety risks, improved internal training and education to ensure that all employees thoroughly understand the company's high standards for food safety and food handling, engaged a third-party consultant to perform regular inspections of all restaurants, and finally, creating an independent food safety advisory council comprised of food safety experts to provide ongoing guidance on best practices.”
Plus, contactless mobile pickup and delivery orders have a tamper-evident packaging seal.
Increasing Demand for Drive-Thru
During the quarter, Chipotle opened 19 new restaurants including 11 with a Chipotlane, its drive-thru for digital orders. The brand was planning to open 49 new locations but with construction delays, those plans are on hold.
Earlier this year, Chipotle said it was looking to double the number of Chipotlanes.
But now, that number may go even higher. As many as 60-70% of new locations could have Chipotlanes, explained Hartung. The brand is looking to add more Chipotlanes to its new store pipeline and is going back to real estate developers to explore adding more.
“…The mix of higher-margin order ahead and pickup transactions has more than doubled for these restaurants (with Chipotlanes) as compared to the pre-COVID time frame,” CFO Jack Hartung said.
A recent opening of a Chipotle with a Chipotlane in Eureka, Calif., posted day-one sales of $15,000, “one of the highest opening days of all time,” Hartung explained.
The brand remains optimistic about reopening its dining rooms in the near future.
“It will be very interesting to see, as we are given the opportunity to start to open our dining rooms here in the next, call it, weeks or a month, how we're able to continue to keep people engaged in our delivery business, our digital business,” said Niccol.