Industry News | October 26, 2016 | QSR Exclusive Brief

With Sales Again Down Big, Chipotle Charts Path Forward

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With its same-store sales falling nearly 22 percent in this year’s third quarter, Chipotle hopes to draw customers back with new menu items and concepts—but not with its first sister fast casual, ShopHouse Southeast Asian Kitchen.

The restaurant brand’s revenue fell by 14.8 percent to $1 billion for the year, and restaurant transactions fell by 15.2 percent as Chipotle fights to recover from damages due to E. coli and norovirus outbreaks in late 2015.

In a conference call Tuesday, founder and co-CEO Steve Ells said the company is emerging from “the most difficult year in its history” and that it will focus on the guest experience through menu innovations and expanding digital ordering.

“We believe this is a good way to entice infrequent or lapsed customers to return, as well as a way to increase sales,” he said.

Earlier this year, Chipotle introduced a new menu item: chorizo, which now accounts for about 7 percent of overall sales. The brand also announced that it is testing two dessert items and plans to select one to offer nationally.

Chipotle will also pull the plug on expanding its 15-unit Southeast Asian concept ShopHouse, instead focusing on its pizza and burger fast-casual concepts, Tasty Made and Pizzeria Locale, which Ells said have broad customer appeal.

Chipotle will open its first Tasty Made Thursday in Lancaster, Ohio, with a menu containing just burgers, fries, shakes, and sodas, all of which will be priced to compete directly with quick-service chains.

“We bring Chipotle’s commitment to better-quality ingredients, a focused menu, fast

service, and customized orders to Tasty Made,” Ells says in a statement about the opening.

“Each order is sent to an advanced queuing system that uses heads-up visual cues so that the team can cook and serve the food very quickly. This is in stark contrast to typical fast-food burger chains, where frozen burger patties are usually cooked ahead of time and held until later, at which time they are assembled.”

During the third quarter, Chipotle opened 54 new restaurants, bringing its total count to 2,178.

The company will also introduce a new digital ordering web platform that will be integrated with new food prep lines that focus on digital orders, catering, and delivery to improve restaurant efficiency.

While Chipotle does have a digital ordering app, Ells says the method accounts for about 6 percent of orders and the goal of the new web platform is to make digital orders more appealing to bring that number even higher.

“It’s important that when you add something to the restaurant, you take something away, although with the addition of new menu items, we’re not going to take away other menu items; there are things we can do to create efficiencies in the way we prep in the way we get ready for business,” Ells said during the conference call. “You balance everything in the restaurant, and we will make some things are more efficient so that we will be able to add things like a dessert item or a new menu item.”

By Alex Dixon

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