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Chipotle Speeds Up Plans for Real Estate Expansion as Digital Orders Grow

More Than Half of Upcoming Locations Are Expected to Include Pickup ‘Chipotlanes’

Photo Courtesy of Chipotle.

Chipotle Mexican Grill is accelerating store openings across the United States to capitalize on digital ordering and drive-thru purchases that have grown during the pandemic.

The Newport Beach, California-based fast-casual chain, which has more than 2,600 restaurants nationwide with large concentrations in the U.S. West, said digital orders surged 216% from a year earlier to reach a company record $829 million in the second quarter. That came even as the company reported revenue for the quarter ended June 30 fell 4.8% from the year-earlier quarter to $1.4 billion, with same-store sales declining 9.8%. Locations with “Chipotlane” pickup windows outperformed those without drive-thru lanes by as much as 30%.

“These great results are fueling our desire to open more than 60% of new restaurants [with a] Chipotlane this year, with the goal of exceeding 70% in 2021,” Chief Financial Officer Jack Hartung told analysts on a conference call. “Opening more Chipotlanes will enhance customer access and convenience as well as increase new restaurant sales, margins and returns.”

The coronavirus pandemic dealt a blow to the larger restaurant industry as dining rooms nationwide have been forced to close and people stay home and spend less on eating out as unemployment grows. But Chipotle and other restaurant chains are adapting their real estate strategy to continued preference for convenience-oriented ordering, which was accelerating well before the pandemic as time-strapped customers avoided dining rooms in favor of online and mobile-app ordering. Chipotle executives said digital orders tend to come with higher total tabs, partly because families are buying food for larger groups of people stuck at home.

Recent nationwide survey data from Upserve Inc., a provider of restaurant management software, showed that 60% of U.S. consumers now order delivery or takeout food once a week. Nearly one-third use third-party delivery services at least twice a week, and the same proportion spend at least $50 per order when ordering food online.

Chipotle executives said the company’s pandemic rebound strategy prioritizes finding locations that accommodate its growing slate of “Chipotlane” pickup windows, as the restaurant chain relocates and remodels existing locations to enable fulfillment of food orders placed online or through mobile apps for pickup and delivery.

Photo Courtesy of Restaurant Business Online.

The company avoided offering specific guidance for total planned restaurant openings this year because of lingering concerns generated by recently spiking coronavirus cases nationwide.

“However, we remain confident in the long-term opportunity to more than double the number of Chipotle restaurants in the U.S.,” Hartung said on the call. “And in fact, our strong financial position along with less competition for high-quality sites as other businesses pulled back is allowing us to build a robust new unit development pipeline.”

The company, which owns its restaurants rather than franchise them, recently opened its 100th Chipotlane near Columbus, Ohio. It also announced plans to hire 10,000 new workers over the next few months, largely to accommodate a surge in digital orders.

“Our digital platform has been a big beneficiary of the current environment,” CEO Brian Niccol told analysts.

Advance pickup orders are deemed a big bright spot, accounting for 61% of all Chipotle sales in the latest quarter. Hartung noted that for the 13 Chipotlane-equipped restaurants that are in the comparable-sales base and opened well before the pandemic, sales were 10% higher than those for non-Chipotlane locations. Restaurants with more recent Chipotlane openings, which took place during the pandemic, have sales 30% higher than their non-Chipotlane counterparts.

Three restaurants that were relocated during the second quarter to accommodate a Chipotlane, along with three others that were remodeled to add the pickup lane, are all seeing higher sales so far compared with a year earlier.

2020 CoStar News.

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