Chipotle's efforts at a turnaround are powered by the brains behind the chain that brought us the fourth meal and the naked egg taco. Who knows what happens next.
— Kristen Hawley
Well, that’s a problem. On his first earnings call since assuming the role of CEO in March, Brian Niccol said he believes the Chipotle brand has been invisible.
How does he plan to fix it?
Niccol outlined a five-point strategy to grow sales, elevate brand relevance and purpose, build the right structure to sustain performance, create a culture of recognition and innovation, and run great restaurants. It’s a neat and tidy list, though not necessarily tactical.
The chain reported a 7.4 percent revenue increase to $1.1 billion.
We’ve already seen some of the company’s initiatives to position the brand as less invisible. A new ad campaign puts focus on the food and ingredients that Chipotle uses — an interesting strategy for a restaurant chain that’s been plagued by foodborne illness. For Niccol, this also comes back to employee education and empowerment. “We have high expectations on guest experience and food experience,” he said. “Great ingredients will help distance Chipotle from other alternatives.”
But, he said, consumers feel the brand is not convenient, and it’s up to the marketing team to change the status quo. Sure, it has 2,400 locations with plans for an additional 150 over the next year. But, he said, “people are asking, when can I get Chipotle to me?” In fact, over half of Chipotle’s customers don’t realize the brand offers digital ordering and delivery in some locations.
Digital Influence in the Kitchen
If only half of Chipotle’s customers know about digital ordering, they’re certainly loving it. Digital sales are up 20 percent year over year, representing 8.8 percent of total sales, slightly up from 8.6 percent last quarter. And mobile sales grew 41 percent year over year. These digitally-placed orders are fulfilled on Chipotle’s second make line, a $25 million expense for the company.
This second make line works in the kitchen, just like the consumer-facing line that has become a hallmark of the Chipotle in-store experience. It’s an efficient way to handle digitally placed orders, whether through the app, through delivery companies, or potentially through touch-screen kiosks in the future.
“There aren’t many places where you can say, I can have that great food done at that speed and then we can innovate on that platform,” said Niccol. “I think we are going to be able to innovate and distance ourselves that will delight customers and give team members the ability to execute flawlessly.”
Your Taco Bell Is Showing
Will Niccol’s experience leading Taco Bell affect Chipotle’s strategy? Early signs point to yes. “Delivery, kiosks, catering. I like all of these things but the question is what comes first and how do we prioritize,” he asked. As Chipotle aims to bring its food — and brand — to a growing numbers of customers, it seems nothing is off the table — including what once helped define the fast food restaurant as we know it: the drive-thru. (Niccol did call potential drive-thru Chipotle locations “a longer-term innovation play,” however.)
Niccol also said that he sees a real opportunity for Chipotle to capitalize on new dayparts, which doesn’t mean only earlier operating hours or a brand new breakfast menu. “There are opportunities to expand our hours and leverage our existing food and platform in a very seamless fashion. With marketing and product innovation, we can turn those downtimes into transaction-driving times.”
As Niccol is leans on his marketing team — led by Taco Bell veteran Chris Brandt — to reposition and adjust the brand’s perception, look for more blunt, ingredient-focused advertising, more in-store efficiency fueled by the digital growth and consumer adoption, and hopefully some exciting new menu items. (We vote more dessert.)