Chipotle executives have been talking about the company’s “two businesses” of dine-in and digital for a long time, and it appears to be gaining traction in a swarming environment.
In the third quarter that was announced in October. 21st The company’s digital sales accounted for almost 43% of its total, even though dine-in customers returned in large numbers. While this isn’t a hugely different proportion than in prior quarters over the last year, the actual volume of digital sales increased 8.6 percent year-over-year, generating $840.4 million.
This continuous double-business no doubt creates operational challenges, especially in a restricted labor market. Recent reports from MarketWatch highlights these issues as well, with a few Chipotle employees reporting that the company’s growing demand for online orders has led to a point. There have been reports of walkouts.
Scott Boatwright, Chipotle’s chief restaurant officer, has called these pressures a “great problem to solve for.”
“Digital is the most durable channel, and we’re extremely content with this. We’re aware that when we bring customers to these channels, the possibility of creating a connection lasting for us is greater,” he said.
Think of it as a Catch-22, and you’ll understand why. Chipotle is expected to bring enough workers to both of its businesses to fund their record-breaking revenue. Boatwright says Chipotle’s “employee value proposition” is industry-leading. Chipotle was one of the first massive chains to agree to a minimum wage of $15 per hour and established a pathway to general manager posts. However, it’s the work that the company did before the pandemic that has rekindled his confidence in the company’s ability to withstand the rigors of such a situation.
“It’s a massive challenge, but we already had our core competencies and training in place [before the pandemic],” Boatwright stated.
The retailer added a third makeline specifically for digital orders in the year 2016. The line doesn’t need the same staff since it eliminates the parts directly aimed at customers. When the new operating procedure was in place, the company saw an exponential increase in sales via digital channels. For 2018, the company increased between 5% and percent. For instance, in the following year, they rose from 10 percent to 20 20%.
As the pandemic swept through and dining establishments were closed across the globe, Chipotle’s online sales surged to more than 90%.
“When COVID accelerated digital sales and allowed us to improve our capabilities from the beginning in the process. Brands that are just trying to figure out how they can compete on the digital side, especially in the current labor market-I, I cannot imagine how difficult that will be,” Boatwright said. “For ourselves, we’re grateful for the first digital investments we made have yielded huge returns for us. It was luck.”
This isn’t to say that Chipotle will soon rest on its achievements. Chipotle recently made an investment in the self-driving delivery firm Nuro for example. Although it’s too early to tell how the test will go, automated delivery may undoubtedly reduce some labor demands to handle the growing number of online orders.
“We believe that there is a massive demand for delivery services, not just today, but it will only continue to increase. There always will be a group of people who gather and gather around an event. It’s not going away. However, more and more people are forwarding for convenience and more accessibility points, and the need for delivery services will continue to rise,” he said.
The company also launched a digital-only restaurant at Highland Falls, New York, only delivering and picking up. Boatwright believes the possibility of more of these ghost-kitchen type (and less labor-intensive) models is enormous, especially to complement already busy Chipotlane models.
“We are considering this and trying to figure out how we can incorporate this to enhance our portfolio. If I own a trendy Chipotlane restaurant and am looking to ease some pressure on that establishment, could I set up a digital-only restaurant to ease the stress? We’re looking at strategically placing them in geographical areas to meet the local and demographic needs of the area,” Boatwright said.
But, we’re also most likely to witness more digital-only locations as the company pumps the accelerator in the Chipotle model. Chipotle can generate 10% to 15% higher profits and better margins to capture more digital customers. In addition, 75% of the new restaurants will fall under the Chipotle model.
While there aren’t any new technology investments at the moment, Boatwright said the conversation is “constantly happening.”
“We frequantly look for innovative ways to improve efficiency and ensure that opportunities are in our sights. The world is changing, and we have to be creative and elegant,” he said. “We need to stay relevant just like we’ve done with digital drive-thrus and even digital makelines. Let’s put the idea out there and look at how it goes.”