- Chipotle’s comeback is in full swing, with same-store sales growing 9.9% in the most recent quarter.
- Former Taco Bell CEO Brian Niccol took the helm at Chipotle to turn around the struggling chain in March 2018.
- Since then, Niccol has rolled out various strategies, including new menu items, delivery, and a new rewards program.
Chipotle’s comeback is in full swing.
In March 2018, Brian Niccol officially took the helm as chief executive at Chipotle. Niccol took over from Chipotle’s founder, Steve Ells, at a time when the chain needed to make some massive changes. Chipotle had been struggling to attract customers following an E. coli scandal that spanned late 2015 to early 2016.
Since Niccol took over as CEO, shares of the company’s stock have more than doubled. On Wednesday, the company reported same-stores sales grew by 9.9% in the most recent quarter.
“This is the fifth consecutive quarter of accelerating comps, which reinforces our view that when we connect with guests through culturally relevant marketing, focused on Chipotle’s great taste and real ingredients, and provide more convenient access with less friction, they respond enthusiastically,” Niccol said on a call with investors.
Here are six of the strategies that Niccol has used to launch Chipotle’s impressive turnaround.
New menu items
Chipotle took an unorthodox strategy to rolling out new menu items. In early January, the chain debuted Lifestyle Bowls, diet-specific menu items made with ingredients that are already available, which customers can order on the app or website.
Lifestyle Bowls were a hit in the first quarter. Looking forward, Niccol told investors that customers can expect both more “new” menu items made with existing ingredients and actual new menu items, such as queso and quesadillas.
“We’re using our stage-gate process to evaluate either new ingredients and/or new forms to bring into the restaurant,” Niccol said. “And one of our key criteria in order to bring in a new form or an all new ingredient is it can’t have an impact on throughput.”
Massive mobile push
Digital sales grew 100.7% at Chipotle, totaling $US206 million and making up 15.7% of the company’s sales in the quarter.
“Consumers love the app experience. They love the new website experience,” Niccol said. “And that’s resulting in them committing … more and more to this easier access approach through the digital channel.”
From mid-December to early-January, Chipotle made a massive delivery push, including offering free delivery to customers. The deal drew in many people who had ditched or never eaten at the chain. Niccol said on Wednesday that nearly half of those who took advantage of the deal were new or lapsed customers.
Together, delivery and mobile order-ahead highlight the rise of Chipotle’s second-make line for orders that are not placed on the chain’s assembly line. This second-make line, which will also be utilised for drive-thru orders, has the potential to continue to boost sales.
“We expect digital sales mix to continue to improve for the foreseeable future as the company increases the number of locations with a digitised second make line (currently ~1,300, all units by year-end), adoption of loyalty grows, and delivery expands,” BTIG’s Peter Saleh said in a note on Thursday. “As we have stated, we believe digital transactions will help drive margin expansion for Chipotle as all digital transactions are executed on the more labour-efficient second-make line.”
A new rewards program
Mobile growth goes hand-in-hand with Chipotle’s new rewards program, which launched in mid-March with the promise of free guac and the possibility of free money. It reached one million members in just 10 days.
On Wednesday, Chipotle reported that the program already had three million members.
Chipotle – known for its quirky, nontraditional advertising strategy – has gone more mainstream with its marketing under Niccol’s control. In the most recent quarter, the chain ran ads during March Madness and used social media to highlight the chain’s ingredients and its free delivery deal.
“Collectively, these marketing efforts help drive culture, drive the difference and ultimately drive the Chipotle purchase,” Niccol said.
Making it more enjoyable to visit Chipotle
Chipotle has revamped its internal training and leadership programs, in an effort to improve operations that Niccol says is already paying off.
“If you had a chance to be in Chipotle lately, I think they have really improved versus where we were three months ago, six months ago or even nine months ago,” Niccol said. “Our crews are staffed – they know about how to make great food, they’re doing line testings, the restaurants look great.”
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