Fast Casual and the Comeback Kid

It looks like Chipotle is back in a big way.

While it has taken the company some time to recover from food safety issues, CEO Brian Niccol’s work to re-energize the fast casual standout has finally paid off, with Chipotle reporting a 33% increase in online sales in the last quarter, which now account for 10% of overall sales.

In addition, customers spent an average of about $16 to $17 per online sale, compared to $12 at restaurants.

Chipotle’s same-store sales also had a boost this last quarter, increasing 3.3%, mostly due to a 4% increase in menu prices and customers ordering queso that was recently added to its offerings, reported The Modesto Bee (July 26).

While Niccol’s initiatives included testing a “happy hour” deal, novel menu items, and a new restaurant layout, the company is being cautious to avoid implementing anything that will lead to operational complications. Additionally, it isn’t delving into the highly competitive breakfast category. New restaurant openings are on hold until the company reworks existing locations. In fact, it is closing some 55 to 65 restaurants to make the company’s recovery smoother, reported Fortune (July 27).

Niccol’s priority is to keep building on Chipotle’s success with delivery.

“We now have 4 million active monthly users across our app and our website, a 65% increase since the end of last year,” Niccol said on a second-quarter earnings call July 26.

But over 50% of the chain’s customers don’t realize that Chipotle offers delivery, he said, so building awareness is key. While delivery is available from 1,700 restaurants, he expects it to reach 2,000 restaurants by year-end. A digital second make-line is expected to be in all locations by the end of 2019, while the digital pickup shelf test in New York City will be expanded to several markets next month.

Niccol is pleased with how quickly digital, access, loyalty and menu initiatives are being rolled out into test markets. He believes the pilot for Chipotle’s loyalty program, specifically, will be instrumental in helping the chain understand how transactions are interacting with each other, which he says is a new skill the company wants to build upon.

“Access is the number one lever we can pull to drive sales,” Niccol said.

That strategy ensures that Chipotle is well on its way to making an even bigger impact in the fast casual space it helped pioneer.