Digital Sales, Drive Thru Boost Chipotle's Bottom Line
Results
In Q4 2023:
Opened 121 new restaurants with 110 locations including a Chipotlane.
Digital sales represented 36.1% of total food and beverage revenue.
Total revenue was $2.5 billion, an increase of 15.4% compared to Q4 '22. The increase in total revenue was driven by an 8.4% increase in comparable restaurant sales attributable to higher transactions of 7.4% and an increase in average check of 1.0%, and to a lesser extent, new restaurant openings.
Restaurant level operating margin in the fourth quarter was 25.4% compared to 24.0% in Q4 ‘22. The fast-casual brand says the improvement was primarily due to the benefit of sales leverage and, to a lesser extent, lower paper costs. These decreases were partially offset by higher inflation across several food costs and, to a lesser extent, wage inflation.
2023 YoY:
Opened 271 new restaurants with 238 locations including a Chipotlane.
Comparable restaurant sales increased 7.9%.
Operating margin was 15.8%, an increase from 13.4%.
Restaurant level operating margin was 26.2%.
Long-term growth goals of reaching 7,000 restaurants in North America.
90% of all restaurant management roles were internal promotions.
Chipotle Mexican Grill CEO Brian Niccol gave a glimpse into how the brand is amplifying technology innovation and recapped a few guest-facing improvements in a February 6 earnings call with analysts.
It was part of an earnings call to discuss the fast-casual brands' financial results for Q4 and its "outstanding 2023."
“We delivered outstanding results this year, driven by our focus on exceptional people, exceptional food and exceptional throughput,” said Niccol.
To continue its growth, Niccol said, Chipotle will continue to focus on the same five key strategies:
Sustaining world-class people leadership by developing and retaining diverse talent at every level.
Running successful restaurants with a people-accountable culture that provides great food with integrity, while delivering exceptional in-restaurant and digital experiences.
Making the brand visible, relevant and loved to improve overall guest engagement.
Amplifying technology and innovation to drive growth and productivity of its restaurants, support centers, and in its supply chain.
Expanding access and convenience by accelerating new restaurant openings in North America and internationally.
Improved Operations
Niccol pointed to the improvement in the company’s operations and credits the company’s low GM turnover. “Over the last couple quarters, we have put the building blocks in place to deliver great throughput,” he said. “...We have adjusted the cadence of orders on the digital make line to achieve a better balance of labor between the two lines. Additionally, we began collecting data on the execution of the four pillars of throughput in our restaurants and providing feedback and coaching on a weekly basis.”
Amplifying Technology Innovation
Niccol pointed to the continued improvement in the brand’s digital experience. “We made several enhancements to our app functionality, including order readiness messaging, wrong location detection, reminders to scan for points to check out, prior order history and more. This has helped to reduce friction points and improve the overall experience for guests.”
Chipotle also launched freebies, known as Freepotle, for its 38 million+ rewards members. These ‘suprise and delight’ efforts – such as a free beverage, entrée or guacamole, were successful in driving engagement and enrolling new members, he said. “From the Freepotle drops, we were able to learn more about our rewards members to improve our ability to deliver relevant experiences in the future.”
New additions to the app also included suggestive upsell, based on data Chipotle has on its rewards members including prior order history. “Going forward, I believe we are on a multi-year path to commercializing our customer data and insights into more targeted marketing campaigns and improving the overall digital experience that will drive increased frequency and spend over time,” he said.
Niccol also provided an update on its Cultivate Next Fund, which launched two years ago with an objective of making early-stage investments into strategically aligned companies that further Chipotle’s mission to "cultivate a better world" and accelerate its strategic priorities.
“Since launching this fund, the amount of innovation that we have seen across the food tech landscape has surpassed our expectations and encompasses everything from farming to supply chain to alternative proteins and oils to in-restaurant automation and more.”
Chipotle is partnering with Hyphen to develop an automated digital make line and Vebu, to develop Autocado that cuts cores and scoops avocados.
“Both Hyphen and Autocado could help to improve the overall experience for our teams by removing less favorable tasks and for our guests by providing on time accurate and delicious food,” he said, adding that they continue to work on iterations of each technology at the Cultivate Center.
In 2024, Chipotle plans to pilot the automated digital make line and Autocado.