In August, former Chipotle CEO Brian Niccol made the surprising jump to Starbucks after more than six and a half years leading the fast casual to soaring unit expansion and consistent sales and traffic growth.
He was replaced on an interim basis by Scott Boatwright, who has led operations for the past seven years. The new leader made one thing clear to investors on Tuesday—the strategy is not changing.
“I have worked alongside our talented executive team to craft and evolve our successful strategy, and we will continue to execute against it,” Boatwright said during Chipotle’s Q3 earnings call. “This includes our long-term targets of expanding to 7,000 restaurants in North America, increasing our AUVs to over $4 million, and expanding our restaurant-level margins and growing internationally.”
DOWNLOAD: Average-Unit Volumes for Top Fast-Food Chains
Boatwright took over one of the best-performing brands in QSR. In Q3, sales grew 13 percent to $2.8 billion, fueled by 6 percent comp growth and 3 percent transaction growth. In-restaurant sales lifted 80 percent over Q3 2023, and digital sales mixed 34 percent. Chipotle opened 86 new company-operated restaurants, with 73 locations including a Chipotlane, and one international licensed store. The fast casual ended Q3 with 3,615 stores systemwide and a $3.18 million AUV.
Although Chipotle’s numbers show a well-oiled machine, the company is still intently focused on bettering throughput and operational execution—right in Boatwright’s wheelhouse.
In Q2, Chipotle began concentrating on the expo position—the employee between salsa and the cash register who helps expedite order assembly and payment process. Restaurants with an expo position average five incremental entrées in their peak 15 minutes (the period when the restaurant serves the most customers in a short window).
Boatwright explained that the expo role is difficult to execute because the crew member may be doing other tasks, like prep, which prevents proper deployment. In August, Chipotle decided to put the manager on duty into the expo position during peaks. This has improved the percentage of restaurants with an expo in place to over 60 percent, compared to just over 50 percent in Q2. The move improved accountability, customer communication, and order completion at the cash register.
READ MORE:
Chipotle to Streamline Hiring Process with New AI Platform
Collaborative Robots Officially Enter the Kitchen at Chipotle
Chipotle Invests in a Mediterranean Fast Casual Brand
Among restaurants that do not have the proper throughput infrastructure in place, employees are having to prep food during peak periods, which can slow order processing. In some cases, teams are starting food prep at 6 a.m. or 7 a.m. to deliver food on time when the store opens. This includes slicing and dicing produce, hand-mashing avocados to make guacamole, frying chips every day, and grilling items like veggies and chicken.
“One of the challenges that we have in our restaurants is in the mornings our teams are so involved in cutting, slicing, dicing, chopping, and really preparing all the wonderful ingredients to be used throughout the day that oftentimes they fall behind for a host of reasons whether that’s a call out or a new team member joining the team that is less talented with a knife,” Boatwright said. “Those challenges are formidable and that oftentimes causes us to not be deployed effectively at peak and not able to drive great throughput.”
Previously, Chipotle looked into preparing food offsite and delivering it to restaurants. But Boatwright said that option comes with its own complexities and inherent risks.
“Largely the opportunity is how do we create that experience?” he said. “We can be consistent with regard to how we prep, but then distributing and keeping that food safe during the distribution process from the central location out to, call it, a spoke and hub. It’s just challenging. And when we looked at it a few years back, it was cost-prohibitive as well. And so right now, we feel like the working model we have is the best way to Chipotle to deliver our unique experience, but that’s not to say we couldn’t look at something different down the road.”
Boatwright believes it’s possible for Chipotle to reach its heyday of just over 30 entrées per 15 minutes. Right now, it’s trending in the mid-20s. The chain saw an increase of 1.2 entrées per 15 minutes during Q3.
Technology will help. The chain currently has several initiatives in stage gate that will help improve prep and cooking. Chipotle is in the process of launching a dual-sided plancha (a type of flat-top grill) to 74 more restaurants, which should be completed by the end of November. The brand is implementing the innovation in new openings as well as retrofitting it in existing restaurants.
Chipotle has also been testing a produce slicer to streamline time-consuming and repetitive tasks. The equipment should help with completing the prep process on time, which will result in better labor deployment at peak periods. Additionally, it should help with consistent cut sizes. The rollout of the produce slicer should be finished by next summer.
“It would be an understatement to say our teams are excited about this new tool,” Boatwright said. “In fact, at our all-major conference in March, nearly 5,000 managers and above-restaurant leaders gave it a standing ovation.”
The fast casual is planning automation as well via Hyphen’s digital makeline—which can build bowls and salads while employees make burritos, tacos, and quesadillas—and the Autocado, a robot that cuts, cores, and scoops avocados. These features were installed in their first restaurants for testing during Q3.
“We have already received a lot of learnings on both innovations from our crew and our guests that will be used for future iterations,” Boatwright said. “As you can see, we have a number of initiatives underway, and I envision significant back-of-the-house changes in the near future that will drive efficiencies and improve the consistency of our culinary in our restaurants. This will enable our teams to focus on and execute the four pillars of throughput better than we ever have and deliver an exceptional experience for our guests in restaurants every day.”
For 2024, Chipotle expects full-year same-store sales growth in the mid to high-single-digit range and 285 to 315 new stores (over 80 percent having a Chipotlane). In 2025, the brand projects 315 to 345 new units, with over 80 percent having a Chipotlane.
