Chipotle executives sounded optimistic as they admitted the chain has many obstacles to overcome in order to regain consumer trust and market share.
— Kristen Hawley
Chipotle, which turns 25 years old this year, has had a rough go as of late. A series of illness reports have taken the once fast casual darling to a darker place. But during the company’s fourth quarter earnings call, outgoing CEO Steve Ells emphasized Chipotle’s commitment to both changing with the times and improve the Chipotle experience for everyone.
Mobile orders are up 50 percent year over year, fueled by the revamped Chipotle mobile app. Digital sales account for 8.6 percent of average sales, though in two markets, digital sales comprise over 10 percent, Ells said. He did not elaborate on which markets those are.
This mobile growth continues to drive Chipotle’s restaurant strategy. It’s added a second preparation area in some of its restaurants, geared specifically toward making mobile orders — as not to disrupt the in-store flow customers have come to understand and expect. Ells says that 30 percent of Chipotle locations — both existing and new — will have these second prep areas installed by the end of the year, focusing first on the stores with highest mobile order volume.
Mobile will impact more than just the kitchen, Ells said. Stores will also implement new designs optimized for mobile ordering. Expect more comfortable dining areas, too. Ells called out “significant refresh and maintenance efforts,” including replacing dim lighting and outdated equipment. The chain’s $50 million investment works out to about $20,000 per restaurant for these improvements, said Chipotle chief financial officer, Jack Hartung. “This will ensure the environments are warm and welcoming for our guests,” he said.
The New Mobile Normal
This initiative mirrors what we’ve seen from other fast food and fast casual chains: a focus on optimizing all workflow, accommodating the new stream of digital orders, but also making the in-restaurant experience more welcoming. The chain also plans to implement a loyalty program in the second half of 2018 as part of a larger marketing effort.
“It’s low-hanging fruit to change lightbulbs and add new stainless steel pans that aren’t bent that cause people to notice a difference. They’re shinier, brighter, cleaner,” said Ells. “Right now we have engaged with three different architectural firms to create the next version of the Chipotle experience. We’ve deliberately asked them to remodel existing restaurants. We’ll start to see those come online shortly.”
In addition to renovations, Chipotle will invest $10 million in prototype restaurants that will inform new design and remodels in 2019 and 2020.
Ells doesn’t give an update on the search for a new CEO, and says only that the search is “well underway” for an experienced executive who will “improve execution, build trust, and drive sales.” He announced he would step away at the end of last year, though will keep the role of chairman.
“I fully intend to have the new CEO be in charge,” he said. “So many of the candidates come from the restaurant industry. While they’ve enjoyed a lot of success they never had the kind of purpose we had at Chipotle which is exciting to all of them. It’s not lost on them that you can have both. You can have a purpose and you can have a product popular with consumers and you can have a great economic model. We need to get back on track and build momentum again.”
Hartung echoes this sentiment. “To be best in class we need to continue to improve,” he said.
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