Chipotle also spoke to length about its new digital-order pick up shelves. Niccol said it’s unclear in many restaurants where to pick up take-out orders, which detracts from the experience. In a downtown Denver restaurant, Chipotle cut a window into the wall near the kitchen door, not far from the register, and put a digital pick-up sign above it. That change caused a double-digit increase in the store’s digital sales within the first few weeks. Niccol said it served as in-store marketing and raised awareness. This represents a big opportunity, he added, since research has shown that more than half of Chipotle’s customers aren’t aware they can even order ahead for pick-up.
The brand looked into adding these types of windows but realized it wasn’t logistically feasible. The response: Self-serve shelves and a sign overhead. These could roll out faster and more cost effective.
“We have digital pick-up shelf prototypes in a handful of restaurants as we speak, and expect to expand into another test market this summer,” Niccol said. “These shelves unlock the power of our second make-line and accelerate our digital sales flywheel to drive more mobile and delivery orders, and more group orders in addition to increasing peak capacity in our restaurants by providing a relief valve for our very busy customer-facing service line.”
Chipotle is adding flat screen TVs at some food prep lines as well to replace printed digital orders and improve employee productivity.
Niccol did touch on menu changes, although it wasn’t as defined as some investors hoped. He even hinted chorizo could possibly make a comeback.
A significant change Niccol noted was the addition of a Happy Hour to enhance Chipotle’s value proposition during non-peak snacking hours with $2 tacos with a drink between 2–5 p.m. “We’re also exploring a similar offer for increased late-night sales after 8 p.m.”
“We think about menu innovation in four key ways,” he said. “No. 1, what do our customers tell us they want, like nachos and quesadillas [that] we’re experimenting with in the test kitchen. No. 2, items our customers tell us they want to bring back, like chorizo. No. 3, new items that can be unique to Chipotle, like the frozen Mexican chocolate milkshake, and the avocado tostada that are also in the test kitchen. And finally, No. 4, celebrating exciting items that are already in our restaurants.” Niccol mentioned the shredded tofu Sofritas as an example.
Chipotle also said it was reorganizing its operational structure to remove layers. This is the main driver in the aforementioned $115–$135 million charges.
“We have flattened the organization with the removal of layers, which when combined with clear roles and responsibilities will speed up decision making and drive better results,” Niccol said. “We’re putting in place a clear governing structure for the organization to enable efficient execution. Importantly we will build muscle around innovation by establishing a stage-gate process where we test, learn, and iterate. So when we roll out a new initiative we are highly confident in the probability of success.”
Marissa Andrada, the brand’s new chief human resources officer hired in April, said Chipotle’s new organizational structure, aligned with the Newport Beach, California, and Columbus, Ohio, support centers, would provide “world-class service levels to our restaurants.” Also, it’s streamlining the structure to eliminate two layers to “stay nimble and agile as we grow. Allowing us to reinvest in new capabilities and skills.”
Branding was a big focus of the call as well. Chris Brandt, formerly the executive vice president and chief brand officer at Bloomin’ Brands’ Outback Steakhouse, Carrabba’s, Bonefish Grill, and Fleming’s, who joined March 20, said Chipotle is working on a new tagline and cultural narrative.
“There is such a unique emotional component to this brand stemming from its authenticity and transparency about food that we need to reinforce and reignite,” he said. “To that end our ultimate marketing mission is to make Chipotle not just a food brand, but a purpose-driven lifestyle brand. … Chipotle will become a brand that people want to know about, want to be a part of, and want to wear as a badge.”
“I can easily see a future where Chipotle more than doubles the business to $10 billion in revenue,” Niccol added in a statement. “We will execute flawlessly in our existing restaurants, add more high-performing restaurants, build brand relevance and engagement, expand digital capabilities for team members and customers, and build an organization with top tier talent that can win today and cultivate a better future.”