Chipotle in 2018–19 had moved well past its food-safety woes. Then-CEO Brian Niccol (now with Starbucks) arrived from Taco Bell in March, taking a brand he first called “invisible” to two of the best fiscal calendars industry-wide. Chipotle exited 2018 with revenue growth of 8.7 percent and same-store sales gains of 4 percent. It followed with expansion of 14.8 and 11.1 percent, respectively—the latter of which appreciated a 7 percent jump in traffic.
While some of this undoubtedly owed to Chipotle’s marketing and social rewiring, the other reality was the brand struck a formula to balance a larger shift. Digital sales at Chipotle in 2019 grew 90.3 percent, year-over-year, and reached 18 percent of the business. That 90.3 clip lapped 42.4 percent growth from a year earlier.
Sales outside the four walls evolved from a number not even worth reporting on quarterly recaps to a triple-digit riser. And yet, Chiptole was also managing busy cafes, as it had for decades.
Haris Khan, Chipotle’s VP of operations services, who came over in August 2018 as director of restaurant excellence (previous stops included VP of ops at Thistle, senior operations manager of on-demand integration at Taco Bell, and senior ops manager at Jack in the Box) says the brand was “firing on all cylinders” as 2020 loomed. There was alignment across GMs, and “everyone was driven by the purpose of cultivating a better world,” he says.
“And then, something happened in 2020.”
Chipotle stretched from a 5–10 percent digital mix enterprise to 100 percent overnight. Unlike some chains, though, COVID-19 didn’t crater performance. Digital exploded 174.1 percent in 2020 as revenue rose 7.1 percent, with comps climbing 1.8 percent despite falling 9.8 percent in Q2 when the pandemic landed. They were back in the green a quarter later (8.3 percent) and continued lifting in Q4 (15.2 percent).
Chipotle had to figure out staffing-related issues, Khan says, as well as operating hours. When should it be open? Should it modify? What needed to happen on the supply side so the full menu remained available, whenever it did turn the lights on?
What happened next has become a well-worn story in quick service. Chipotle’s reaction to chaotic conditions, once guests returned in-store, left it disjointed on those same 2018–19 strengths so buttoned-up before the clasps came off.
“Here’s the beauty of our industry,” Khan says. “Solutions are not rocket science. They’re really not. The answers are always in the restaurants. So if you find out you have any issue, whether it’s related to throughput, whether it’s related to quality, whether it’s related to portioning, go into the restaurant. See what’s happening. Break down where the issues are actually occurring and work backward to solve it.”
Labor allocation got messy. Managers pulled crew members from the front to digital to help when one side of the business spiked. Chipotle needed to change pickup times logic based on different sales and deployment levels. Turnover neared 200 percent at the crew level, making it difficult to train and hold employees accountable to standards.
So in 2022, Khan says, Chipotle did something outside the breakneck playbook investors had come to expect. “We really started to lean into this idea of how do we get back to the basics,” he says. “How do we get back to being brilliant at the basics?”
Chipotle called the retrenching “Project Square One.” Khan recalls management stopping and clearing the decks and initiatives piled on during the pandemic. Amid COVID, Chipotle launched a new labor management platform and learning software. It rolled multiple LTOs to generate news and get customers back, and introduced complexity as a result of stacking efforts during difficult times, especially from a staffing angle.
“Project Square One was getting back to who we are,” Khan says, “which is about developing or attracting exceptional people and preparing and serving exceptional food.”
“Those two things,” he adds. “Exceptional people and food. Nothing else mattered.”
It refocused the lens at Chipotle. Any innovation had to meet two standards: Does it impact people in a positive way? Does it elevate Chipotle’s food?
“And if so, let’s run it,” Khan says. “If not, let’s park it.”
Let’s flip to the present. Chipotle in 2024 told investors turnover numbers were the lowest they’ve been in the history of the company. Its taste of food scores reached record marks, Khan says.
Chipotle in Q3 reported a 13 percent sales increase to $2.8 billion, driven by a 6 percent rise in same-store sales and a 3 percent uptick in transactions during a restaurant era when flat traffic is considered a positive outlier for most. In-restaurant sales surged by 80 percent compared to Q3 2023, and digital sales mixed 34 percent. Q2 comps soared 11.1 percent and transactions 8.7 percent.
Less tangible, at least from a reporting perspective, Khan says the culture within restaurants came back. “And it really did just reestablish the foundation for us at Chipotle,” he says.
The brand in recent periods has placed “throughput” atop the reasons why. In line with Khan’s comments of returning to the basics, Chipotle focused on staffing the expo position—the employee who expedites order assembly and payment. Assigning the manager on duty to this role during peak times increased the percentage of restaurants with an expo in place from just over 50 percent in Q2 to more than 60 percent in Q3. This was key, the brand said, because restaurants with an expo position average five incremental entrées in their peak 15 minutes. Additionally, Chipotle addressed food prep timing to ensure employees could keep up with demand.
Average-unit volumes climbed to $3.18 million in the period—they were $2.2 million year-end 2020 and $2.641 million the ensuing calendar—with prospects of $4 million-plus on the horizon.
Where things stand today for Chipotle, Khan says, is those pillars of running great restaurants have allowed the brand to meet evolving guest preference on its own terms. Customers are craving experience more than ever, he says. Convenience isn’t going anywhere, but when diners make the conscious decision to come into stores to witness the aromas, hear the sizzle, and walk down the line, it’s critical for QSRs to get that right, even with digital hovering.
It’s why “hospitality” has reentered the lexicon after years of transactional, contactless directives.
Chipotle figured out how to bring that back into restaurants and make it work with a new generation of employees asking for programs and benefits and job duties that give them a chance to be successful in multiple aspects of their lives, from mental health to debt-free degree programs.
Khan believes finding those answers began, in truth, by remembering the days before everything changed. When Steve Ells created Chipotle in 1993, he established a few characteristics that would later serve as check points of a category ultimately termed “fast casual.” The vision and ideology being to serve premium ingredients at abundance, at an affordable price point (why casual dining felt the disruption so sharply), yet fulfilled in the quickest way possible (the reason quick service had to spin its own wheel in the category’s emergence). Still, even after COVID and leveled against today’s macro stressors, like inflation, these are day one traits reflective of how the Chipotle experience should be, Khan says.
So the brand couldn’t layer on throughput fixes before getting the foundation of people and food right. “The formula that we use is if you have exceptional people and you add on exceptional food, then, in theory, that should equal exceptional throughput,” Khan says. “So 2024 has been all around that. But the first thing we had to do is we had to identify the nuances of throughput. What had it been failing, to a certain degree? Why had it not been prospering and doing what we wanted to do, thinking that every customer is going to be able to come in and get in and out of that line?”
Khan is a proponent of addressing concerns from the ground level, identifying, then reverse engineering. That’s how Chipotle fixes gaps, he says—it works backward.
Phase 1 was trying to understand the friction with scheduling employees before they got into restaurants. Chipotle examined processes to ensure it staffed peaks appropriately. Then, it looked at prep, if it was getting completed on time, and were employees able to reach breaks and finish before 11:30, when rushes began. Lastly, as noted, were they deployed to the right spots? “Because if you have the proper deployment during your peak periods,” Khan says, “and you’re acting with a sense of urgency, then nothing should stop you, right?”
What was different now than previously, say pre-2018, was Chipotle had to tackle this in-store work with what had, for all intents and purposes, became an entirely new business thanks to digital. It needed to get creative with primary and secondary duties to navigate and manage through dual channels.
Thankfully, Chipotle had digital-enabled second make-lines installed across restaurants. The brand, at 5–10 percent digital mix, began to invest millions in 2018 into equipment that didn’t exactly justify the present. Khan says it wasn’t the easiest sell on paper, but Chipotle took a “build it, they will come” mindset. It was as much a team member projection as a consumer one. The idea of grabbing printed chits or taking a digital display monitor and having it by the front line was something Chipotle recognized would create noise for the diner coming in.
That turned out to be hugely prophetic.
By making this call, Khan says, Chipotle thrived during COVID since it addressed that “invisible” guest queuing on the front line who wreaked havoc on so many quick-service brands trying to handle a two-front rush of pent-up demand.
“The challenge became, as in-restaurant traffic started to come back, how do you take that deployment model and make it work within the labor pool that you have?” Khan says. “Because that doesn’t grow. You have to figure out how do you adjust the standards to make it work.”
The reality was, most times you can’t. What Chipotle could do, however, was refocus its workforce. And it started by going into restaurants.
“See what tools and systems and processes can be revamped or eliminated so that they can just focus on preparing and serving exceptional food on any line that there is,” Khan says. “And by doing so, whether it’s through automation, or it’s through just reducing complexity, you’re able to really balance those two things and you’re able to balance those two lines as a direct result of that.”
“It’s challenging, yes, but I’d encourage folks to take a look at what the day-to-day lives look like for those crew members and figure out areas where you can reduce complexity, eliminate friction, and you’re going to organically see that the focus is going to start shifting back to the customer,” he adds.
In the beginning of 2024, Chipotle held an all-managers conference in Las Vegas. Roughly 4,500 attendees showed up and the company used the event to inform, align, reward, and recognize GMs. It also broke the mold and invited crew members who had been with the brand for 20-plus years.
Khan says this was done with the intention of highlighting Chipotle’s purpose-driven DNA (would it have crew members with two decades of tenure otherwise?)
And one of the lead messages, along with people and food, was how it could get back to winning at throughput.
Again, from the outset, speed paired with quality was part of Chipotle’s competitive advantage.
If you want deeper proof, 2014 is a year 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.
The brand had no real sight those days of whether throughput was an enabler or driver of its transaction growth. Was the fact it was operating faster leading to more orders or allowing for them?
It’s the best kind of question to ask—one where the answer doesn’t matter. Chipotle found itself addressing it again in Q1 2024 as throughput reached its loftiest level in four years. Executive Jack Hartung told investors great LTOs, advertising, and throughput resulted in transaction expansion. “And similar to [the] comment from 2014,” he said, “that’s exactly what was happening—is throughput is an enabler or a driver of transaction growth, for not just many quarters, but for many years.”
At that point in 2014, Chipotle had delivered double-digit revenue growth over a five-year period (the food-safety crisis arrived in 2015). It reached 18 percent year-over-year growth in 2013 as McDonald’s and Burger King reported 2 and 4 percent, respectively. Like Hartung espoused in 2024, throughput was one of those factors that cascaded into everything working better. Customer satisfaction scores, bonuses for employees, and so forth.
To frame this in different terms, faster throughput resulted in better guest experience and food scores. It also allowed for more orders and business. It’s a cycle that fed upward, and still does, if you have the product and people part figured out, Khan says.
“Keeping the decks cleared, so we now focus on those three things and not comprising on it,” he says, “we’re starting to see throughput really thrive and consistent improvement, month over month, heading in and out of peak seasons.”
Portions and pricing
Earlier in 2024, Chipotle management spent a portion of its earnings recap addressing social chatter. There was a hack making the rounds on X and TikTok where guests filmed the order-making process to ensure employees scooped more out of fear of being caught on camera.
Khan says, on a certain level, the drama unlocked a larger rally cry for Chipotle. Internally, it was able to mega-phone an equity that, alongside ongoing evolutions, Chipotle wanted to make sure it didn’t lose sight of. And if that meant retraining to ensure portioning, “that’s exactly what we’re going to do,” Khan says.
“Here’s the beauty of our industry,” he adds. “Solutions are not rocket science. They’re really not. The answers are always in the restaurants. So if you find out you have any issue, whether it’s related to throughput, whether it’s related to quality, whether it’s related to portioning, go into the restaurant. See what’s happening. Break down where the issues are actually occurring and work backward to solve it.”
Chipotle reexamined operations, management told investors in July, and found roughly 10 percent of stores—through portion scores on surveys—were identified as outliers in need of re-coaching.
It was a chance to market and improve behind the curtain. Khan says Chipotle didn’t have an issue, generally, on the front line. But could it become more consistent with digital where customers didn’t know what they got until they peeled the label off? “For us, it was just, let’s continue to be generous with our portions and let’s make sure that we’re serving the customer exactly what they’re ordering, every single time,” he says. “It’s a work in progress and we’re going to continue to lean into it.”
Chipotle recently confirmed it was raising prices systemwide by an average of 2 percent, with the rollout underway. William Blair checks suggested movement from 1.4 percent in Washington, D.C., to as high as 2.7 percent in Atlanta.
With the uptick, which laps a 3 percent lift in the year-ago period, Chipotle should enter 2025 with roughly 3 percent of price, sufficient to offset expected low-single-digit food cost inflation, William Blair said.
But also, it’s yet another reason the brand must deliver on quality, abundance, and consistency.
“Social can be a blessing and a curse,” Khan says. “It’s what you do with those curses that can really define and make you who you are. For us, it’s simply listening. Listen to what’s actually being said. If it’s truly valid, develop programs that are simplified and easy to execute and be delivered out in the field. You go into a restaurant at Chipotle, you’re pretty much getting two meals out of one. But again, how do you bring that level of awareness up? It’s a combination of everything.”
Chipotlanes and cobots, and the future ahead
This is one of Khan’s favorite stories to recount. In 2018, there were about 25 people in the Chipotle office. The brand had recently shifted from Denver to Newport Beach and the transition gave the new HQ a startup-like vibe, Khan says.
Most nights, from about 5 to 6 p.m., maybe 6:30, 7, they’d sit around and brainstorm. What does Chipotle have on deck? What’s the vision? What can it mess around with? “Whether it’s through this scale-fast approach, or whether it’s just through testing and learning and then hopefully seeing what sticks and move it forward,” Khan says.
In these sessions is where Chipotle’s “stage-gate” methodology formed. Then, one night, someone asked, “what about drive-thrus, but not your typical drive-thrus?”
The room hummed. If there was ever a quick-service feature that didn’t fit Chipotle, it was this hallmark of fast food. Imagine pulling up to a speaker box and calling out your protein, rice, beans, salsas, etc., before you ever got to upsells? The guest would need to reach the window and wait for the bowl or burrito to be made. It’s a concept, logistically speaking, the stuff of operational nightmares, Khan says.
The drive-thru, as the drive-thru, also didn’t align with the brand’s ethos. Historically, it represented a handoff between quality and convenience for the guest. Chipotle figured it could change that latter perception thanks to how technology (kiosks in every consumer’s hands) shifted the parameters of experience/convenience. But it couldn’t be business as usual.
When first imagined, employees at Chipotle would have to assemble orders on the digital makeline and walk 10–15 feet to place food on a digital pickup shelf accessible to customers. Could it reduce the number of steps?
And, again, was there a way to create another access point that felt traditional and carried the same benefits as a traditional drive-thru, but didn’t feel traditional?
Khan says Chipotle began by asking itself what it was trying to solve. The answer was an age-old principle—offer the ability to get food without getting out of the car.
And so, the solution boiled down to those “kiosks.” Chipotle elected to require customers to order ahead and roll through, using the window as a pickup point, instead of allowing them to order food on-site. The company reconfigured layout so employees serving the window had “maybe 3 to 5 feet” to move.
Everything flashed. Chipotle tested the “Chipotlane” in five restaurants to gather a sizable sample. “It took off,” Khan says.
Early openings debuted with sales 20 percent higher than traditional formats and operated with 200 basis-points higher restaurant-level margin. The incremental profit comfortably offset the $75,000–$100,000 cost of a Chipotlane and yielded cash-on-cash returns of at least 500 basis points above standard units, analysts suggested then. Additionally, they drove about 15 percent higher overall digital sales mix—a critical margin point when you considered the ability to push more carryout orders over third-party delivery.
One of the initial times Chipotle spoke about the “Chipotlane” was in November 2019, when Niccol addressed CNBC’s Evolve Summit in Los Angeles. He claimed it was taking the brand “all of 12 seconds” to get food to customers through the format.
Khan’s proclamation the format “took off” doesn’t do it justice. By summer 2021, there were 250 of them. Come November 2022, 500. And just last month, Chipotle lifted the lid on Chipotlane No. 1,000, with a continued plan to devote 80 percent of go-forward development to the format. There are 285–315 new Chipotle units slotted for 2024. So the present fact 30 percent of the brand’s more than 3,600 locations include one is a figure that’s going to swell as Chipotle targets 7,000 North America restaurants—a plan with reimagined economics thanks to the pickup lane.
Khan shares this is merely one facet of innovation at work. Chipotle always thinks across a few buckets: What does the brand need presently? Mid-term over the next two to three years? And then longer-term, what’s pie in the sky where the company can either work to co-develop or co-create, and eventually bring that through?
“Everyone wants to innovate. No matter what,” Khan says. “That’s the buzziest word you could possibly say during any conversation. But you can’t innovate for the sake of innovating. You have to have a purpose behind it. And our purpose is clear: It’s got to reduce friction, or it’s got to improve margin, or it’s got to grow sales. If it doesn’t meet those criteria, we won’t even work on it.”
Some examples include software that leverages AI to eliminate the need for a GM to coordinate and schedule interviews. Now, GMs insert the blocks they’re available and candidates are automatically set up. Chipotle used AI to shed a task and didn’t pull labor out; it repurposed it.
Next, Chipotle is thinking through tools for tasks such as inventory management, ordering, and prep, because many of those options are dated. Employees are printing paper and walking around restaurants to conduct inventory. The company is developing apps to bring that mobile.
Specifically on the prep side, it’s developing unlocks so employees can ensure it’s being completed on time and there’s access to data where managers identify bottlenecks to prep for the future. “What you’re doing is creating a pipeline of initiatives that are set out for one to 10 years where you’re doing to be able to just continuously and essentially simplify and streamline and create new efficiencies for the company,” Khan says.
Chipotle today is also working on implementing a new dual-sided grill that was tested in 10 restaurants over the past year. It cooks chicken and steak in roughly half the time it takes on Chipotle’s plancha, with consistent execution and the same sear and char. That should go into dozens of units soon.
Additionally, rice cookers. Since employees hated washing dishes, Chipotle devised a three-pan piece of equipment where workers no longer need to mix or portion rice out of a big pot into pans. It simply cooks in them directly. “These are the types of initiatives we’re willing to work on so long as it doesn’t compromise the integrity of our product quality,” Khan says.
“You can margin improve your way out of a business very quick,” he adds. “And so, for us, the top priority is keeping quality alive.”
An example: the opening layer of Chipotle’s stage-gate is typically its VP of culinary.
Naturally, there are some buzzier innovations grabbing headlines. Two of them—Chipotle’s automated digital makeline with Hyphen and its avocado-prepping “Autocado”—began official live tests in September. The “Augmented Makeline,” a cobotic makeline, deploys automated technology to build bowls and salads while Chipotle employees operate the top makeline to create burritos, tacos, quesadillas, and kid’s meals. About 65 percent of all Chipotle digital order are bowls or salads, so it’s a potential massive unlock.
The Autocado, developed in tandem with Vebu, cuts, cores, and peels avocados before they’re hand mashed to make guacamole. The Autocado, on average, takes roughly 26 seconds to fully flesh out the fruit inside an avocado. That, too, presents alluring results when you consider Chipotle estimates it will use about 5.18 million cases of avocados this year, or 129.5 million pounds of fruit, across the U.S., Canada, and Europe.
“Both of these started off as what ifs,” Khan says. “Could we do something like this? And you’ve got people shaking their heads. You’ve got people thinking what issues it could spark up. And then you also have people thinking how can we truly solution it and make it a reality.”
But don’t count on robots running Chipotle restaurants.
“There’s this human connection that’s very meaningful and powerful as you think about your brand. … We really pride ourselves on people using the kiosks in your pocket today,” Khan reiterates. “And two, not eliminating the need for that human connection because that need exists. And it’s not going away anytime soon. I tell you on the front line, throughput is driven by a sense of urgency and human nature carries that sense of urgency. So we’re going to continue to push that as much as we can go, but leverage cobotics to not eliminate jobs, but to eliminate manual, repetitive tasks that are just time consuming and quite frankly, boring, and repurpose that labor so that we can then have team members focus on what we need them to.”
