Chipotle Mexican Grill’s CEO Brian Niccol sees an opportunity for more automation in the restaurant.
The digital innovator made headlines recently for announcing its pilot with Miso Robotics that will use the robotic kitchen assistant named Chippy to make tortilla chips and for its $50 million venture fund to help bankroll like-minded innovators.
In a Q1 22 earnings call with analysts on April 26, Niccol said, “there is a real opportunity, frankly, to make the restaurant be much more efficient. Obviously, Chippy is our first attempt. And we've worked with a lot of our employees to identify what are the tasks that they would love to see us bring automation to or AI,” which could include the back of the restaurant, the digital make line and other tasks. There is “tremendous opportunity for us to become even more efficient where it results in a better employee experience and also a better customer experience. And that's really the lens we're using on this,” he added.
Chippy is currently being tested at Chipotle's innovation hub in Irvine, Calif., and soon will be integrated into a Southern California location. "We can leverage our stage gate process to listen, test and learn from our crew and guest feedback before deciding on our implementation strategy,” Niccol explained.
Q1 ’22 was a strong quarter for fast-casual brand, which reported financial results for its Q1 ended March 31.
Compared year over year, Q1’s total revenue increased 16% to $2 billion. Comp sales increased 9%. As consumers return to dine-in, in-restaurant sales increased 33.1%. Digital sales account for 41.9% of food and beverage revenue.
"Chipotle's performance in the first quarter was strong, despite challenges from the Omicron variant and on-going inflation," said Niccol.
Loyalty Pays Off
Three years after its launch, the Chipotle Rewards program is approaching 28 million members. To celebrate the milestone, Chipotle relaunched Guac Mode, an exclusive benefit for Chipotle Rewards members that unlocks access to surprise free guacamole rewards throughout the year; this resulted in “our highest social engagement of all time and loyalty enrollments of 35% week-over-week,” Niccol explained.
86% of restaurants surveyed say they’re leveraging POS data for loyalty programs and for upselling/special offers in 2022, according to HT's 2022 POS Software Trends report.
Chipotle is leveraging its CRM, “focusing more on personalization and using predictive modeling to trigger journeys that can influence guest behaviors as well as make their experience with Chipotle more relevant for them,” said Niccol.
When it comes to communications, diners want personalized communications. In fact, 32% of customers say personalized communication based on their purchase history is important to them, according to HT's 2021 Customer Engagement Technology Study.
Chipotle uses personalized messaging to educate the guest about an item he or she has previously ordered, to view their ordering preferences or to see the potential environmental impact based on their order history. “We are constantly learning, evolving, and optimizing to drive more frequency with rewards members,” he added. ”We are pleased with the progress to-date, but believe we will get even better over time.”
The Convenience Factor
Locations with Chipotle’s digital drive-thru or Chipotlanes continue to outperform stores without due to the convenience factor, Niccol said. During Q1, Chipotle opened 51 new restaurants during the first quarter with 42 locations including a Chipotlane. “We expect to open between 235 and 250 new restaurants in 2022 with at least 80%, including a Chipotlane,” said CFO Jack Hartung during the earnings call.
Food, beverage and packaging costs in the first quarter were 31% of total revenue, an increase of 100 basis points compared to the Q1 ‘21. The increase was due to inflation across the menu partially offset by leverage from menu price increases, according to Chipotle's Q1 earnings release.
Restaurant level operating margin was 20.7%, a decrease from 22.3% in Q1 ‘21. The decrease was primarily due to increases in hourly wages and higher food costs, partially offset by leverage from menu price increases and lower delivery expenses. Chipotle's full earnings release is available here.
Chipotle owns and operates over 3,000 restaurants as of March 31 in the United States, Canada, the United Kingdom, France and Germany.