Chipotle’s Strategy, 8 Things to Know
Looking for something healthy and tasty to eat? It often feels like those two words don’t go together. But more and more consumers are turning to Chipotle to satisfy their cravings. Last year Chipotle’s revenue increased by 14.4% to reach $8.6 billion. That’s a growth rate which would leave most retailers envious especially in light of record high levels of inflation. If you are curious about how Chipotle continues to grow while others struggle consider these eight elements of its strategy.
1. Chipotlanes. If you have purchased food from Chipotle recently you may have noticed there is an option to order ahead and simply get your order from a pickup window. This pickup concept is called a Chipotlane. It’s a modern take on the drive-thru which allows you to get your order much faster. “On average, it only takes about 10 minutes from the time a guest places an order until it’s ready for pickup, which is simply outstanding,” said Brian Niccol Chipotle’s CEO. “Chipotlanes also continue to outperform non-Chipotle locations due to the convenience, which is encouraging since digital order pickup is our highest margin transaction.”
Restaurants with a Chipotlane have 15% higher sales than restaurants without one. Since this concept has had great success Chipotle plans to add Chipotlanes to 90% of its stores going forward. “By 2019, we saw promise in the concept,” said Tabassum Zalotrawala, Chipotle’s chief development officer. “We could see that the sales margins and returns are far higher in restaurants that had a Chipotlane versus non-Chipotlane.” Innovations like this have helped Chipotle to build a strong digital business with 39.4% of Chipotle’s food and beverage revenue last year coming from digital channels.
2. Personalization. With over 30 million members Chipotle has one of the largest loyalty programs in retail. One of the keys to the success of the program are personalized offers. For example, a customer that is a vegan will not be sent an offer for something that contains meat like a beef burrito. Last year 60% of Chipotle’s rewards were personalized and Chipotle plans to increase that percentage this year. “When people are engaged in our rewards program, we get more purchase frequency out of them,” said Niccol. “The most engaged people come through our digital business when it comes to our rewards program. The combination of high engagement with rewards specifically around the amount of personalization … will result in more frequency … down the road.”
3. Healthy food at a fast food pace. One of the things customers love about Chipotle is that they can get a fresh and healthy meal that is customizable in just a few minutes. Unlike McDonald’s whose beef patties are frozen before they are cooked all of Chipotle’s ingredients are fresh. “We have no freezers, no can openers, no microwaves, so it’s as fresh as it gets,” said Scott Boatwright, Chipotle’s chief restaurant officer.
4. Store expansion. Chipotle is taking advantage of its high performing business to open more stores. Chipotle has just over 3,000 stores now but believes it can have as many as 7,000 stores. To help reach this goal in 2023 Chipotle plans to open 255 - 285 stores.
For its store expansion Chipotle is targeting small towns with populations of 40,000 to 100,000. These restaurants will have lower foot traffic but “the cost structure is more favorable in these small towns,” said Niccol. “The shift to work-from-home during the pandemic for many office workers provided Chipotle with the incentive and opportunity to expand to more suburban markets to attract the customers where they live, and away from Chipotle’s historic urban core focus,” said Matthew Goodman an analyst at M Science. “This shift is particularly important for Chipotle given our data suggests that pre-pandemic lunch accounted for a majority of the concept’s sales — if workers are not in urban cores during the day, you need to go to where they are.”
Source: Fortune
5. Social media excellence. When Chipotle created an account on TikTok in 2020 it was the first restaurant brand to do so. It then became the most followed food related brand on TikTok. Challenges like Chipotle’s #GuacDance which has over one billion views on TikTok boosted Chipotle’s popularity on the app. “The key thing is wherever you are, make sure your advertising is endemic to that platform. The things we put on TikTok are unique to TikTok,” said Chris Brandt, Chipotle’s chief marketing officer. “We have a group of people internally and with an agency that have a really good sense of what’s cool on TikTok, what will be popular on TikTok, and so we really turn them loose. We use influencers, we do all those things. Each one has its own role.”
“We saw incredible potential with being an early mover on TikTok and tapping into the Gen Z audience. We were patient as we waited to strike when we had a unique insight and the right opportunity to show up on the platform in an engaging way,” said Brandt.
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6. New store formats. Chipotle opened its first Chipotle Digital Kitchen in 2020 in New York. There is no dining room at this location and customers can pick up orders they have ordered online from this location. The restaurant also services delivery orders. “The new prototype will allow Chipotle to enter more urban areas that wouldn't support a full-size restaurant and allows for flexibility with future locations,” said Chipotle in a statement.
7. Simplicity. No one is going to accuse Chipotle of having a lack of focus. Its tried and true menu has barely changed over the years. For example in 2021 for the first time since 1993 when Chipotle first opened it introduced a new chicken item called Pollo Asado. The limited time offer was a way for Chipotle to lure in new customers without revamping its menu.
Chipotle tends to offer limited time offers two to three times per year and other limited time offers have included its smoked brisket and Chicken al Pastor.
8. New restaurant concepts. Chipotle recently opened a new restaurant concept called Farmesa. As Fast Company writes: “gone are the tortillas [at Farmesa], and instead all food will be served in a bowl. Each bowl will feature one protein served with grains or greens, as well as two sides, one of five sauces, and a topping. Among the main bowls are Classic Santa Maria-Style Grilled Tri-Tip Steak and Everything Spice-Crusted Ora King Salmon. Sides include Sprouted Cauliflower and Sweet Potato Chips.” All of the ingredients at Farmesa are organic and non-GMO and beverages are all-natural.
Customers cannot dine at Farmesa but can order onsite as well as pickup orders. Customers can also get their Farmesa orders delivered. "Our New Ventures team, which was created in 2022, developed a unique restaurant concept that uses classic culinary techniques with flavorful ingredients in a fast casual setting that we're excited to test and learn on before we determine a broader rollout strategy," said Niccol.