More on labor, digital gains, and the changing face of Chipotle’s business
In the past 18 months, Chipotle made operational adjustments to adapt to a shifting world. It’s an effort wrapped around the fact it continues to retain about 80 percent of digital sales gained during COVID alongside in-restaurant recovery, which has returned about 80 percent.
Chipotle has needed to allocate labor among different roles, including its digital make-line and the frontline, depending on available staff. Essentially, trying to strike an operational balance between its two businesses. Staffing challenges are proving an exercise in flexibility, Niccol said.
Chipotle has been able to keep its frontline (cafes) open given its ability to divert orders on the digital line to overcome periodic challenges. On-site managers are making that call.
The frontline represented nearly 60 percent of Chipotle’s business in Q3, or $1.1 billion in sales. And it’s only growing. “We still have some work to do, but our goal is to provide exceptional throughput as speed of service is a foundational element of convenience that our guests truly value,” Niccol said.
Meanwhile, digital sales upped nearly 9 percent in the quarter to $840 million. Similar to chains across the sector, mix is moderating as dine-in returns, but digital dollars are still growing. In fact, year-to-date, Chipotle generated digital take of close to $2.7 billion—slightly below the $2.8 billion figure it achieved all of last year.
A key for Chipotle is its two separate avenues are serving different customer needs, and proving incremental. Currently, about 65 percent of guests use in-restaurant as their main access point. Twenty percent tap digital. And the remaining 15–20 percent use both. “We're encouraged by this dynamic as it gives us several future opportunities, including the ability to convert more of our in-restaurant guests into higher frequency digital users,” Niccol said.
Chipotle’s highest-margin transaction, digital pickup orders, are gaining traction as well, Niccol said. It represented slightly more than half of digital business in Q3. Naturally, this is one pulsing reason the brand is dedicating 75 percent-plus of growth to Chipotlanes.
Niccol said internal numbers show Chipotle is getting food from order to guest in less than 10 minutes. It was 12 minutes a couple of quarters ago. That’s only going to improve as more Chipotlanes enter the system.
As of September 30, there were 284 of them, including 12 conversions and eight relocations. So far, they’re opening with 10–15 percent higher sales, Hartung said. Margin is higher because sales are, and also due to efficiency. The digital business at Chipotle is usually 10–15 percent higher, meaning it’s closer to 55 percent these days. Notably, Chipotlanes skew toward order ahead.
With an incremental investment cost of $75,000–$85,000, it’s “by far, a superior return,” Hartung said. “It’s not any smaller than a typical restaurant, so it doesn't take a different footprint,” he said. “What we are experimenting with though is a smaller footprint with a Chipotlane, where we might be able to go into a seen location. And the seen location would be where you've got two restaurants already. They could be very, very high-volume restaurants and there just isn't really enough room to economically put a third restaurant in between those two.”
“Well, if you can reduce the footprint, which reduces the rent, reduces the investment cost and because we have higher margins with Chipotlane and because customers—more than 50 percent of them want to go through the Chipotlane order ahead and pickup—it's mostly digital and almost half of that is order ahead and pickup,” he added. “[Then] we do have an opportunity economically to drop in a restaurant in between those two high-volume restaurants.”