Chipotle Is Hitting the Gas Pedal on Its Digital Efforts
Chipotle (NYSE: CMG) disappointed investors with its recent earnings report and can't seem to get its footing on the road to recovery. However, there's one bright spot in the midst of these challenges: the company's focus on its digital efforts. Digital ordering is fast becoming a "must have" for restaurants. Mobile "order ahead" for quick service restaurants could grow to $38 billion by 2020, according to Business Insider.
It's been a year since Chipotle first announced a push to upgrade its digital capabilities. Since then, digital orders have taken off. And as the company beefs up its technology roadmap, it's also speeding up the in-store improvements to make it all happen.
Digital ordering is accelerating
In the third quarter earnings call, Chipotle announced a plan to increase the number of orders it was receiving online and via the mobile app. At the time, this channel represented only 6% of revenue.
Since rolling out "smarter pickup times" in February, the company has seen a 51% increase in digital orders. Sales fulfilled through the second make line -- a smaller work area behind the main customer counter that specifically processes online and catering orders -- peaked at 8.5% in the second quarter before falling slightly to 8% in the third. That said, the highest volume stores are seeing up to 15% of revenue from digital orders. This success has encouraged the company to invest even more into these opportunities.
Tech leads the way to a better customer experience
In May, Curt Garner took on the position of chief digital and information officer. Garner has significant experience with customer-centric mobile applications from his time as the chief information officer at Starbucks, and he's been busy building out the technology roadmap for Chipotle.
In the recent earnings call, Garner explained a number of the technology improvements in store for customers:
- A new iOS and Android app is launching Nov. 6, which includes rapid reorder, favorite meals, nearest restaurant, and fastest pickup time features.
- A planned Facebook partnership that will allow delivery via GrubHub and Delivery.com is targeted for the fourth quarter.
- Integration improvements that could bring on up to four more delivery partners is planned along with a pilot of tiered pricing for catering.
On the previous quarter's call, Garner even hinted that the new app would allow digital offers, a preview of a "loyalty program", but there was no update in October.
Tech is improving store efficiency
With the increases in digital orders, the second make line will have its own challenges. As I explained previously, the company has designed a new "heads-up display" along with software to translate the customer's order in a way that's easy for line workers to assemble. This enhanced solution improves the throughput of the second make line by 40% and has been installed in 62 of the busiest second make line restaurants. Chipotle has also ramped up its rollout plan and expects to be in over 200 stores by the end of the year.
Recently, CEO Steve Ells underlined the importance of digital ordering backed up by an improved second make line:
Garner's role in this transformation has been no accident. While his current employer may not have the same aspirations for its mobile apps as his previous one, Chipotle certainly understands the role its digital experience will play in bringing customers back to its stores.
10 stocks we like better than Chipotle Mexican GrillWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Chipotle Mexican Grill wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of November 6, 2017
Brian Withers owns shares of Chipotle Mexican Grill and Starbucks. The Motley Fool owns shares of and recommends Chipotle Mexican Grill and Starbucks. The Motley Fool has a disclosure policy.