The 2014 calendar is one that’s often referenced at Chipotle. It’s when the chain’s throughput hit peak levels and comp sales climbed every quarter, despite a high-inflation commodity market (relatively speaking). Revenue growth in Q1, Q2, and Q3 lifted 24, 28.6, and 31 percent, respectively, as same-store sales hiked 13.4, 17.3, and 20 percent.
What was true then and apparent of late as well, is Chipotle wasn’t certain whether throughput was an enabler or driver of its transaction surge. Put differently, was the fact it was operating faster leading to more orders or allowing for them?
But just like 2014, Chipotle isn’t sure it matters. “… because when we’ve got great LTOs with great advertising and that we’re executing great throughput, we know the transactions will flow,” CFO Jack Hartung said Wednesday during the brand’s Q1 call. “And similar to [the] comment from 2014, that’s exactly what was happening—is throughput is an enabler or a diver of transaction growth, for not just many quarters, but many years.”
Chipotle was an industry outlier in 2014, delivering double-digit revenue growth over a five-year period (this predated the food safety crisis). It hit 18 percent year-over-year growth in 2013 as McDonald’s and Burger King reported 2 and 4 percent, respectively. The notion speed played a factor only glanced at a larger picture.
CEO Brian Niccol said it’s one of those things that “cascades into everything being a lot better.”
“Customer satisfaction scores go up, bonuses go up, all kinds of good things are happening in the restaurant. The food is better, the experience is better,” he said.
In turn, throughput creates a flywheel that’s once again allowing Chipotle to separate from the pack a decade later. The brand began 2024 with same-store sales growth of 7 percent as total revenue lifted 14.1 percent to $2.7 billion. But the flashing metric was higher transaction growth of 5.4 percent, year-over-year. Average check also lifted 1.6 percent as pricing in the quarter was 2.8 percent or so. Thanks to stores in California taking a 6–7 percent hike to counter the $20 wage mandate, Q2 and Q3 should be in the 3.5 percent range, with Q4 closer to 1.5 percent as the brand laps last year’s lift.
There was also some mix disruption of about 100 basis points due to group size declining 2 percent, Hartung said (more solo trips to restaurants). Yet side attachment continues to rise for digital and in-restaurant, less from drinks and more with add-ons like extra meat, chips, and queso. “It is getting better, even in the in-store channel,” he said.
This, too, returns to the building blocks of “running better restaurants,” or what Chipotle dubbed, “Project Square One,” earlier last year. “Part of that, we think, frankly is when we have the line fully staffed, we do think we do a better job of not only making the burrito but making sure when the burrito or the bowl is presented to our cashier that these extras and these sides are more properly run up,” Hartung said.
Growing traffic in quick service in 2024 is hardly baseline. According to Revenue Management Solutions, visits for limited-service chains dropped 3.5 percent industrywide in Q1. That marked a sizable decline from Q4 2023 when traffic dipped 1.7 percent.
Like other chains, Chipotle’s slogged through weather in January but consistently saw a step-up after, Niccol said. Transactions ran in the mid-single-digit range. “A real testament,” he said, “to the work that’s been going on both in the restaurant around throughput and then, obviously, some of the marketing work that we have got going on both with Barbacoa and Chicken Al Pastor.” He added momentum has continued into April.
Where is the consumer coming from? Niccol said it’s broad-based and gaining from low- to higher-income households. Per RMS, net sales across quick service rose 0.8 percent in Q1, boosted by an average check surge of 4.5 percent that occurred because of a 4 percent rise in average price.
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Where Chipotle has found itself, Niccol said, is at a strong value proposition compared to the field, California or otherwise. Simply, if it’s now comping with quick-service competitors on check, the brand feels confident about its differentiators.
“What we hear back from every group is, it’s a great value proposition,” Niccol said. “So the speed at which people can get these quality ingredients, customize the way they want for the price points that we provided is … just [creating] value in this environment.”
Throughput pulsed out of the pandemic as Chipotle worked to rebalance the growing channels of its business. The digital surge pulled resources off the front line and left stores uncertain how they should allocate resources.
Niccol previously shared Chipotle noticed when its digital make line got busy (a problem that didn’t exist in 2014), managers tended to pull a crew member from the front to assist. So it began testing changes to its smarter pickup times logic based on different sales and deployment levels in certain markets.
From the outset, throughput on the front line improved and the digital setup held steady without hurting sales.
In-store sales in Q1 grew 14 percent over last year (digital mixed 37 percent of the business). Throughput reached the highest level in four years. Restaurant-level margin was 27.5 percent, an increase of 190 basis points, year-over-year.
Before getting deeper into speed, the restaurant-level margin figure tied a Q1 record dating back to 2015. This beat William Blair research analyst Sharon Zackfia’s implied guidance of 26 percent, which she called out due to sales leverage and pricing more than offsetting commodity and wage inflation.
Cost of sales in the period decreased 40 basis points to 28.8 percent as pricing countered sequentially higher beef and produce as well as a mix headwind from the success of higher-cost Braised Beef Barbacoa. Labor declined 20 basis points to 24.4 percent (sales leverage outweighed wage inflation and high performance-based compensation). Other operating costs also declined 100 basis points to 14.3 percent thanks to lower delivery costs and a decrease in marketing/promotional costs of 2.9 versus 3.2 percent last year.
Yet Chipotle’s efforts to shore up peak-period labor deployment standards, including real-time access to peak 15-minute throughput results and the tightening of who works on which line, has pushed the entire business higher.
Niccol said Chipotle improved by nearly two entrees in its peak 15 minutes compared to last year, with each month showing an acceleration.
As the brand outlined at its recent All Manager Conference, it’s sorted throughput into four pillars of execution:
The expo, or crew member who helps expedite the bagging and payment process; the linebacker—typically the manager on shift who supplies both lines with product so the crew can serve guests without stepping back to grab food; making sure everything needed for lunch or dinner peak is ready and where it should be; and having a crew trained and positioned where they need to be.
“The restaurants run more smoothly as our teams are properly trained and deployed, which allows them to keep up with demand without stress. This leads to more stability and therefore, more experienced teams that execute better every day,” Niccol said.
The “stability” piece can’t be overstated, he added. Chipotle in 2021 and 2022 posted hourly crew turnover near 200 percent (194 and 193 percent, respectively). Niccol said the numbers today are down to “historically low levels.” Some regions are “well below 100 percent” for crew, “which I’ve never seen in my time in this industry, I think some of the lowest numbers I’ve ever seen, frankly, at Chipotle,” said Niccol, who came over from Taco Bell in 2018.
“Our folks show up at work wanting to succeed,” he continued. “The more we can do to surround them so that they have a successful day, the better they feel about the job, the better they feel about the experience that they’re giving. Nobody likes to show up and be out of chicken when a customer gets to that point. And so, the more we can do to ensure they prep correctly, they are staffed correctly, they’re deployed correctly, the better the experience is going to be. And I think we’re starting to see that in the turnover numbers. We’re starting to see that in, frankly, just the performance at throughput, right? The ultimate kind of metric to see like is the whole system really working. The whole system is working when we get great throughput.”
Chipotle said it’s nearing a previously stated goal of mid-20s entrée throughput per peak 15-minute period (that was low 20s in 2023). Some stores, Niccol said, are into the high 20s on certain days. “While the benefits of Chipotle’s recent peak throughput gains are likely to become a greater benefit as it enters the higher-volume spring/summer months, we believe throughput may still be in the early innings of becoming a multi-year driver of transaction growth,” Zackfia said in a note.
There’s a Boston financial district Chipotle where, a year ago, was reporting mid-20 entrees in its peak 15. Today, it’s over 40. At times, even as high as 80, Niccol said, which is among the loftiest in the company.
It’s a store with low turnover and outsized transaction growth, “which clearly demonstrates they are creating a better overall experience in the restaurant,” he said.
“When you know the line moves quickly, you are willing to get in line,” Niccol noted. “And also, what happens is the experience is just all that much better, right? The culinary moves faster, and then you get to your experience faster. So our teams run more efficiently. The food, I think, comes across even better prepared, and then you as a customer move through the line faster. So it is one of those things where kind of speed begets speed is the way to describe it.”
Additionally, Niccol spent some time relaying tech updates. Chipotle’s rewards program recently rolled its five-year anniversary and has climbed to a digital reach of 40 million members, up from 38 million in February. In the last couple of months specifically what’s worked well, Niccol said, is using machine learning to figure out how to identify customers who might visit less frequently, so Chipote can keep them in the mix. “We’ll take that learning and figure out how to apply it on a much bigger scale so that then you can feel it across the digital business,” he said. “But it’s those types of things where I think the team is doing a nice job of commercializing the data in a very effective way that ultimately for the customer, it feels like more personalization, more relevance. Therefore, you keep the engagement up, and then, obviously, when we keep the engagement up, we see the higher spend and the more frequency.”
The brand is also exploring tools like forecasting and labor deployment, recruitment, and ways to automate the preparation of digital orders. Dual-sided grills have expanded to a few high-volume restaurants as well, helping to cook proteins faster and enable teams to start prep closer to when it wants to serve customers.
At the All Manager Conference, Chipotle showed teams the latest version of its Hyphen automated digital make line and the “Autocado” that cuts, cores, and peels avocados on its own. Both are scheduled to enter a restaurant later in the year. That latter could, in theory, cut guacamole prep time in half, from about 50 to 25 minutes per batch. Zackfia said Hyphen, which is an under-the-counter automated assembly line, holds “significant potential” to unlock throughput and labor efficiencies considering bowls account for roughly 65 percent of sales.
Chipotle opened 47 stores in Q1—43 of which had a Chipotlane. The brand ended the quarter with 3,479 units and plans to debut 285–315 this year, with 80 percent of those including the order-ahead pickup lane future.
Niccol added Chipotle has no plans to open a traditional drive-thru (order board) since it goes against the customization strength of the brand.
