Earnings

Chipotle Drives Digital To Q3 Wins

Get ready for more digital drive-throughs in the world of quick-service restaurants (QSRs). That was one of the main messages on Tuesday (Oct. 22) in the Q3 2019 earnings report from Chipotle. The move stands as the latest evidence of the tech revolution taking place in the world of QSRs.

“The company has been testing special drive-throughs for digital order pick-up. As a result of successful tests in 20 restaurants, the chain is now planning on putting Chipot-lanes in half of its restaurants currently under construction,” CNBC said. “The longer time period associated with adding the drive-through lanes to more than 40 restaurants means that some openings are expected to be delayed into 2020.”

Digital Sales

The news came as the QSR chain said that digital sales in Q3 increased 87.9 percent year over year, accounting for 18.3 percent of sales in the period. Total revenue increased 14.6 percent to $1.4 billion, the chain said — that met revenue expectations.

“We’re knocking on the door of digital becoming a $1 billion business,” said CEO Brian Niccol in the post-earnings conference call with investors. “[Consistency] with past quarters delivery remained a key driver of our digital growth, given enhanced capabilities on our app and website, as well as our expanded availability from more than 97 percent of our restaurants.”

Niccol also highlighted Chipotle’s rewards program, saying it has some 7 million members.

“We anticipate that’s going to continue to grow,” he said. “And, as I mentioned in the past, we are already starting some experimentation with the various cohorts. And the good news is, when we have done some of these experiments, we’ve seen meaningful changes in peoples’ frequency and their engagement levels with the brand.”

The chain expects more from loyalty in the new decade.

“It’s going to start being a contributor to our sales growth,” he told analysts, “because we’ll have a meaningful database with meaningful numbers of users. And I think we’re learning really quickly, and figuring out what really does result in behavior changes that rewards people and, at the same time, rewards the business with incremental transactions and incremental sales.”

Wider QSR World

Chipotle is not the only QSR operation to recently report its progress — or lack thereof — with digital and delivery efforts. For instance, as the QSR company aims to bring in more diners, McDonald’s is reaching for price increases and deals. It has used promotions, offerings and menu price increases to bolster sales, while renovated stores are also contributing to more visits and sales, The Wall Street Journal reported.

The company has been growing its delivery program as well, as it looks to reach $4 billion in worldwide delivery sales this year, according to CNBC. McDonald’s now has delivery partnerships with Grubhub, DoorDash and Uber Eats, and its delivery offering is reportedly popular with overseas diners.

The earnings news comes as McDonald’s recently announced an agreement to acquire Apprente to grow its presence in the Bay Area, and integrate teams with advanced technology skills into its business. The company noted at the time that the Apprente team will become the founding member of a new integrated group called McD Tech Labs.

CEO Steve Easterbrook said in the announcement, “Building our technology infrastructure and digital capabilities are fundamental to our Velocity Growth Plan, and enable us to meet rising expectations from our customers, while making it simpler and even more enjoyable for crew members to serve guests.”

As for Chipotle, the time of year does impact delivery.

“What we’ve seen is the seasonality was more around the delivery aspect of the business [than] our digital business, because we continue to see growth in our order-ahead business,” Niccol said. “And so, what we’ve also seen is we’ve come out of kind of the summer months. … That strength continued on with the order-ahead business, and then — consistent with what we’ve seen in the past — the seasonality played out in the delivery side of the business.”

The coming months will bring even more clarity to QSR tech innovation.

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