Chipotle Wins By Removing "friction" That Is, Human Contact From Your Experience

Posted: Oct 24, 2019

Chipotle Mexican Grill is having a great 2019. Its stock was up 92 percent through Monday, before it announced it had beaten analyst expectations by earning $3.47 per share in the third quarter ($3.32 was expected) and growing comparable-store sales by 11 percent compared with last year’s third quarter. The company says its sales were boosted in part because of customer enthusiasm for its temporary offering of carne asada.

And yet, after that announcement of a beat on profits and strong sales growth and delicious skirt steak, Chipotle stock is down 5 percent as of midday Wednesday. Why? Perhaps because Chipotle also announced it’s adding new stores a little more slowly than it previously said it might.

The company has its reasons for slowing down: It’s very excited about its drive-through concept, “Chipotlane,” and wants to add a drive-through to more of its new stores, which means store construction will take a little extra time. The Chipotlane push is part of the company’s broader emphasis on digital sales, in which customers order online and either get their food delivered or come to pick it up. Chipotle says digital sales have nearly doubled from a year ago, now making up 18 percent of sales, with the percentage being even higher at the handful of stores already with Chipotlanes.

Chipotlane is, in fact, a digital-only drive-through. You can’t order at a Chipotlane window; you have to order through the app or web and then drive up to the pickup window at your appointed pickup time. On Tuesday’s earnings call, Bank of America analyst Gregory Frankfurt sounded somewhat confused by the concept.

“I guess, right now, you can only order ahead as you pull up to a Chipotlane,” he said. “What’s the likelihood that you shift this model to more of a traditional drive-through operating structure at some point down the line?”

CEO Brian Niccol responded that while nothing would prevent them from making that shift, they don’t think it’s a good idea. He said customers want to order ahead through an electronic device instead of by speaking to an employee.

By Josh Barro
October 23, 2019

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