Chipotle Is Getting Back To The Basics As Its In-Restaurant Business Returns

During Chipotle’s Q2 earnings call Tuesday afternoon, there was a lot of discussion around “throughput” and the company’s efforts to improve it.

Why that’s important is simple: Chipotle experienced a same-store sales increase of 10.1% in the quarter and has largely remained insulated from the current inflationary pressures hitting consumers’ wallets. But there remains plenty of room for improvement, particularly if Chipotle can serve even more meals to more customers throughout the day. That means speeding up the in-restaurant makeline and the second, digital makeline.

Throughput.

This process, however, is easier said than done in an industry that has struggled to find employment.

That said, Scott Boatwright, chief restaurant officer, has a game plan.

“We just launched Project Square One, and it’s literally just that. Let’s get back to square one on how we deliver great fundamentals of great throughput,” Boatwright said during a phone interview Tuesday evening. “The nuances of great throughput include teaching team members on the line how to deliver a great experience and keep moving, to listen out of both ears, hand items down politely to the next team member. The little things add up during a peak volume window and make us so much more efficient.”

Chipotle was close to achieving optimum throughput in 2019 after Boatwright and team introduced a training program specifically focused on the basics of operations. That training included defining necessary positions to execute orders efficiently–positions like expediters, which can move items down the line up to 20-to-30% faster.

In 2019, however, digital sales only made up about 20% of Chipotle’s mix. Now, the company remains well above 35% on digital sales, even as its in-restaurant sales return closer to pre-pandemic levels. In-restaurant sales increased 36% on the quarter.

This has essentially created two separate multibillion-dollar businesses within the company, which has become somewhat of a challenge as team members spent the past year and a half mostly focused on only digital.

“What’s transpired, when we lost in-restaurant business during Covid and moved to digital, that stuff like throughput wasn’t important anymore. After two years, we have new team members and new managers in the business who don’t recall what great throughput down the line was like or how to drive it,” Boatwright said. “As our in-restaurant recovery began to happen about eight or nine months ago, it became apparent to me that we just weren’t there.”

The need to be “there” has become even more critical as Chipotle looks to more than double its footprint, with most new units including a mobile-order-ahead Chipotlane, and as the chain aspires to reach $3 million in average unit volumes, from the current $2.8 million.

In addition to launching Project Square One, Chipotle has also put several other pieces into place to maximize operational efficiencies. Field leaders occasionally work “shoulder to shoulder” with team members during peak hours, for instance.

Chipotle has also implemented a time management and labor delivery tool to ensure staffing is maximized at the right time. The tool’s scheduling capabilities is facilitated by machine learning, meaning it factors in considerations such as promotional events and weather.

The company is also installing a new point-of-sale system to streamline the ordering process for team members, and a new pin pad system to allow customers a faster and contactless payment option.

“All of these things are more efficient and easier for team members and for customers and they save some time on the order,” Boatwright explained.

Of course, there’s also the idea of automation–which Chipotle has embraced with gusto–to save on time and labor. In May, the chain announced it was testing a robot named Chippy to help make tortilla chips. And, just last week, Chipotle announced an investment in Hyphen, a foodservice platform that automates kitchen operations.

Boatwright said Hyphen has the potential to make digital orders automatically, while Chippy removes mundane tasks from team members’ workloads.

“If you ideate to some future state, you can foreseeably see digital orders come into our ecosystem and Hyphen will recognize and prepare a bowl in real time. This will reduce labor on the line, create better accuracy and better portioning and, overall, a more efficient process,” he said. “We think it’s a big idea.”

It’s also a different position from what some of Chipotle’s peers are taking. During McDonald’s Q2 earnings call Tuesday, for instance, CEO Chris Kempczinski said automation won’t be a “silver bullet” and the idea of robots is not practical for the majority of its restaurants.

Conversely, Chipotle is all in on finding emerging tech to roll into its operations. The company launched a $50 million “Cultivate Next” fund in the spring to provide investments with companies that align with Chipotle’s mission, and Hyphen is a part of that fund. Operational efficiency in general is a priority.

According to Boatwright, Chipotle is well positioned to consider emerging technologies, perhaps more so than its peers.

“I think a lot of peers are entrenched and saturated and that has caused them not to think about innovation in the right way. I also think we have an advantage because we’re company-owned and we don’t have a franchise community that may be scared of the unknown,” he said. “We’re at 3,000 restaurants and headed toward 7,000 and we have a big opportunity to really build the Chipotle of the future. The ideas we want to lean into are born in the restaurants and answering what problems we want to solve.”