It's a good thing Chipotle didn't take a wait-and-see approach to digital innovation.
— Erika Adams
In Chipotle’s case, it pays to be an early adopter.
In its first quarter earnings report, Chipotle reported a digital sales increase of 100.7 percent compared to the same period last year.
The chain has gone all in on digital innovation, from equipping its stores to quickly and efficiently handle off-premise orders to launching a digital loyalty program last month that is already three million members strong, and the sales returns are rolling in. Total revenue at the chain increased 13.9 percent to $1.3 billion. Chipotle recorded $205 million in sales via digital channels, accounting for 15.7 percent of total sales for the quarter.
“The digital system, which includes order ahead, delivery, catering, digitized second make lines, mobile order pickup shelves and now Chipotle Rewards, is creating a more convenient and enjoyable guest experience,” Chipotle CEO Brian Niccol said on the company’s first quarter 2019 earnings call.
The Lucrative Future of Digital
In stores where every part of the digital experience is fully functioning, Niccol said that digital orders can account for up to 30 percent of a store’s overall sales.
“We are very optimistic that there still is a lot of growth to be had,” Niccol said.
Comparable restaurant sales were up 9.9 percent in the quarter, marking the fifth quarter in a row that Chipotle has seen lifts in that sales measurement. Chipotle’s Chief Financial Officer Jack Hartung attributed that growth to a higher number of guest transactions, higher average check sizes in the booming digital sales channel, and menu price increases of about 2.5 percent.
Comparatively, comparable restaurant sales were only up by 2.2 percent in the first quarter of 2018.
Banking on Delivery
Average restaurant operating profit margins were at 21 percent in the quarter, the highest margin levels that the chain has reported in nearly four years. Hartung attributed the success, in part, to the chain figuring out its delivery strategy and honing in on it to make sure that it’s a satisfactory experience. However you want to get Chipotle, the chain will make it happen in a timely manner.
“If we didn’t have delivery, we would not have delivered the 21 percent margin,” Hartung said.
Chipotle opened up 15 new restaurants in the quarter, a slow start to the planned 140 to 155 new openings this year. Hartung acknowledged that most of the new openings will likely happen in the second half of the year, and the team is focused on slow and steady growth even in the face of deeply encouraging sales numbers.
The chain has set a long-term goal of running 5,000 restaurants. It just opened its 2,500th location in February.