Could Digital Be the Missing Key to Chipotle's Turnaround?
Guest satisfaction scores are higher at locations with a second make line for handling digital orders, Chipotle said.
The fourth quarter at Chipotle witnessed $1.1 billion in sales with comp sales growth at 0.9 percent—a figure that was dragged down from 1.5 percent by deferred revenue from the company's failed loyalty program, Chiptopia. At the same time, the brand did not announce a new CEO as some had speculated would happen during the call.
"Our results for the quarter clearly show that there is still work to be done to restore a strong growth and customer trust," said founder and current CEO Steve Ells.
But the bright spot amid lackluster news resided mainly in digital, which Ells called the fastest growing part of the business. In the last quarter, digital accounted for 8.6 percent of Chipotle's sales with two regions posting digital sales above 10 percent. It's a smart move for the brand as digital continues to be an area for growth across the industry. For perspective, mobile payment accounts for 30 percent of total tender in Starbucks U.S. system.
"We continue to be optimistic as we further market this capability and as guests increasingly order Chipotle through digital platforms," Ells said.
These gains are largely credited to mobile ordering, which increased 50 percent compared with the same quarter the previous year. The company introduced a new version of the app for Apple and Android devices last November. Taking a page from some of the more successful apps from digital leaders like Domino's, the new app offers quick reorders of favorite or recent meals. Other features include expanded mobile pay and a more user-friendly store locator.
Digital is also creating new efficiencies. Guest satisfaction scores are higher at locations with a second make line for handling digital orders, which cuts wait times below 15 minutes and also improves the brand's Smarter Pickup Times. Chipotle plans to have second make lines in at least 30 percent of its stores by the end of 2018.
"These new lines enable a faster, more accurate experience for our digital customers and allow our crews to more easily support the higher sales volumes," Ells said. "We're prioritizing our markets and targeting locations that currently have the highest digital sales volumes to install these new make-lines."
It's an investment that could yield lasting returns even if the initial impact is latent.