- Chipotle and McDonald’s executives highlighted high-tech drive-thrus as a major opportunity during calls with investors this week.
- Chipotle is opening 60 more locations with mobile ordering “Chipotlanes” by the end of the year, with plans to include drive-thrus in more than half of the chain’s locations opening in 2020.
- McDonald’s is speeding up drive-thrus through tech startup acquisitions as well as behind-the-scenes tweaks.
- With delivery and other forms of off-premise consumption fuelling growth as chains struggle to grow traffic, high-tech drive thrus are a crucial way for locations to boost sales.
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Drive-thrus have always been at the heart of many of the largest chains in America.
Now, after years of hyping technology and mobile ordering, the old-school ordering platform is once again in the spotlight.
On Tuesday, Chipotle announced that it plans to open 60 more locations with drive-thru “Chipotlanes” by the end of the year, in addition to the 20 that are already open. In 2020, more than half of the 150 to 165 locations Chipotle aims to open will include a Chipotlane.
Unlike a traditional drive-thru, Chipotlanes are exclusively used for mobile orders. According to Chipotle CEO Brian Niccol, locations with a Chipotlane have a digital business that is roughly 50% larger than the average Chipotle location.
“Frankly, I think this is the future of how people will want to interact with restaurant companies, because this is arguably faster than any other way possible to get your food,” Niccol said on a call with investors on Tuesday. “You order ahead and you don’t have to get out of your car – and our model is already fast now.”
Niccol said that with only 20 Chipotlane locations currently open, it is too soon to release sales figures for the locations.
“We know that when you can operate Chipotlanes with less friction, meaning it’s easier to order, it’s easy to stop in and pick up [via] Chipotlane without even getting out of your car,” Niccol said. “That tends to cause our customer to want to get to our Chipotlanes even more often.”
“So our optimism, even though it’s very early, is very strong,” Niccol continued. “And the economics with even a modest increase in sales at that kind of an incremental investment is going to be very attractive.”
Analysts were similarly optimistic about the rise of the Chipotle drive-thru.
“We expect improved unit economics to support a more notable acceleration in unit growth [beginning] as soon as 2021, & think investor expectations are for an eventual larger step-up,” UBS analyst Dennis Geiger wrote in a note to investors on Wednesday.
Chipotle isn’t the only chain eyeing high-tech drive-thrus. Starbucks and Dunkin’ have also been testing drive-thru pick-up for mobile orders. More than 80% of the new locations Starbucks opened in fiscal 2018 had drive-thrus, with these models outperforming locations without drive-thrus.
McDonald’s executives also spoke about its drive-thru business as a point of pride on Tuesday.
CEO Steve Easterbrook said in a call with investors that McDonald’s drive-thru times dropped by 20 seconds over the most recent quarter. In July, Easterbrook announced a decline in wait times, including a 15-second year-over-year drop in the month of June.
The change comes after years of longer drive-thru times and follows significant effort from the company. McDonald’s acquired two tech startups this year that will help speed up the drive-thru business while also upselling customers to boost sales. In late September, the company launched a new, optional program intended to encourage certain franchisees to upgrade their drive-thrus, according to documents viewed by Business Insider.
McDonald’s has also simplified menus, added new incentives for workers, and rolled out new tech in an effort to speed up drive-thru times.
“We kind of had a white-of-the-eyes conversation at the start of March. And we collectively agreed that we were going to renew some emphasis on the drive-thru service times,” Easterbrook said in July. “They have been going the wrong way with most of our markets for three or four years for reasons we can understand, as we’ve added more to our business, but we knew that wasn’t a sustaining trend.”
Off-premise business is booming in the restaurant industry.
“Delivery is taking up a big part of the conversation,” NPD food industry advisor David Portalatin told Business Insider. “But, digitally ordered carry-out is growing far faster and is actually a much bigger opportunity.”
Drive-thrus linked to mobile orders combine a fast-food classic with a new way to grow sales, with restaurant industry traffic slumping 3.5% in the third quarter, according to TDN2K’s Black Box Intelligence data released in October. With delivery and other forms of off-premise consumption fuelling sales growth as chains struggle to get more people in restaurants, 2020 will likely see the rise of high-tech drive-thrus at more chains.
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