Innovation

On National Burrito Day, Chipotle Serves Up Signs Of QSR Innovation

Chipotle Serves Up Signs Of QSR Innovation

As far as made-up, non-holiday holidays go, you could probably do worse than National Burrito Day, which takes place on Thursday (April 4). No doubt you’ve been planning for this day for months, scouting out QSRs for the best burrito deals, and making sure you have no pressing appointments around the lunch hour, lest your burrito joy be compromised.

Here at PYMNTS, we run on caffeine and ambition, and while we have no time to stop for burritos today – no matter how temping they may be – we can offer a thoughtful accompaniment to the day’s festivities: a look at the QSR innovation landscape via the experiences of Chipotle Mexican Grill, a chain that has been an early innovator in the space and has strived to get back on a positive financial track.

Chipotle’s Digital Gains

As Chipotle continues its digital efforts, the chain’s stock is having its best year since 2013, with part of the increase credited to investors liking CEO Brian Niccol, who joined the chain about a year ago after turning Taco Bell into a lifestyle brand and introducing breakfast at the quick service restaurant. For the fourth quarter of 2018, Chipotle increased its foot traffic and benefited from higher product prices, and posted year-over-year same-store sales growth of 6.1 percent, with revenue increasing 10.4 percent to nearly $1.23 billion.

Digital made significant gains in Q4, reflecting the chain’s work with eCommerce and mobile commerce. Digital sales increased 65.6 percent and accounted for 12.9 percent of all sales in the fourth quarter – or about $159 million. For the full year of 2018, digital accounted for 10.9 percent of sales.

Part of the growth in digital came from online marketing, Niccol told investors when discussing the latest Chipotle financials. “For example, our 2018 overall digital impressions increased nearly 20 percent year over year, while social impressions increased nearly 40 percent year over year. This was all accomplished without increasing our overall marketing budget,” he said, without offering more detail.

New Initiatives

Chipotle continues to expand its brick-and-mortar footprint. The chain opened 137 new restaurants in 2018, bringing the total count to 2,491. The QSR plans to open up to 155 new restaurants in 2019, part of a push to solve what Niccol called the “No. 1 reason consumers eat elsewhere,” which is lack of convenient access to Chipotle locations.

But with new restaurants also come new or expanded digital initiatives – part of the overall trend, documented by PYMNTS research, of QSRs getting smarter about eCommerce and mobile tech, even as restaurant managers and customers often have differing views about which service and payments innovations work best. Even so, 62 percent of customers said innovations would make them more inclined to visit QSRs in the future, according to the latest PYMNTS Restaurant Readiness Index. And that’s what Chipotle, like many of its competitors, is betting on.

For instance, Niccol said the chain has installed digital “make-lines” – designated food prep areas for digital orders, away from the main customer lines – in 1,000 of its locations, with all stores scheduled to have them by year’s end. Chipotle has also installed digital pickup lines in 1,000 locations, with the full rollout of that technology scheduled to be completed by the middle of 2019.

Chipotle is always seeing growth in its mobile app, which saw downloads increase by 72 percent year over year in 2018, Niccol said. “We continue to see strong interest from new as well as frequent guests at Chipotle,” for that app, he said. That reflects another larger trend, one seen outside the world of QSR burrito providers. PYMNTS research has found 92 percent of customers consider using apps to place QSR orders to be a positive experience. That compares to 65 percent of QSR managers who think the same, an example of those differing views mentioned above.

In addition to expanding the in-store digital technology, the chain also promises to boost Chipotle’s delivery offerings.

“As we continue to remove friction from the digital ordering and pickup process, we expect our delivery time advantage to continue to widen,” Niccol said during the earnings conference call. “Based on data shared with us by our white-label delivery partner, we are consistently among the quickest delivery times in their system, and we expect this to only get better with the addition of pickup shelves and delivery prepay capabilities that enable delivery drivers to walk in, pick up their order and walk out without any delays.”

Mobile Ordering

Mobile order-ahead also represents a major area of QSR innovation – at least in theory – and Chipotle is no exception. The chain is conducting a test in 10 of its QSR locations with a “mobile order pickup lane that we call Chipotlane,” Niccol said. “It is showing promising results with a higher mix of digital sales and total restaurant sales.”

Next up?

A “few dozen more” such lanes in 2019. The process enables customers to receive their Chipotle orders without leaving their vehicles. “It does require you, though, to order in advance and pick your pickup time,” Niccol said. “We have that in about 10 restaurants right now. The nice thing is we’re seeing both digital sales as well as total restaurant sales elevate with this new access point.”

In general, QSR customers – not just those hungry for burritos – are pleased with curbside pickup, as shown by the PYMNTS research report. Just more than 77 percent report positive experiences with the fulfillment method, compared to about 63 percent of QSR managers who expressed similar thoughts, suggesting that employee training and buy-in is a significant part of ensuring such programs work for Chipotle and other QSR operations.

As you enjoy your burrito today – or perhaps just think about burritos – also give thought to the innovative strides being made in the QSR world. Sooner or later, some of these digital features and digitally supported offerings will likely become table stakes as QSRs strive to stand out and profit in a crowded marketplace, amid changing consumer expectations.

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