- [Narrator] Chipotle's menu only has a few items,
but it's highly customizable.
Born in 1993, that's what's made Chipotle
one of the most successful fast casual
restaurant chains in the U.S.
But in recent years, Chipotle's faced many challenges.
Between 2015 to 2018,
Chipotle dealt with five foodborne illness outbreaks.
Like most of the restaurant industry,
Chipotle's revenue took a big hit
during the beginning of the Coronavirus pandemic.
And today it's dealing with inflation
that's increased labor, transportation, and food costs.
Yet despite these setbacks,
Chipotle's sales are actually growing.
Here's how Chipotle's focus on efficiency and innovation
helped it bounce back and become one of the country's
most valuable quick service chains.
This is "The Economics of Chipotle."
Chipotle's revenue has increased by more than 200%
over the past decade.
Its stock price has increased about 400%
in the last five years.
Much of Chipotle's success comes from its efficient
and what it calls "transparent" in-store experience.
- Chipotle has really, in a lot of ways,
made the whole fast casual category for restaurants.
It's not fast food, it's not full service.
They've generated a lot of sales
from people who want this alternative
that's seems fresher and faster than fast food,
but is not a full service experience.
Fast casual design can help them reduce
some of their labor expenses, which helps with profits.
- [Narrator] Chipotle's menu is relatively small
but it's easy to customize.
- There's tons of stuff you can put on your meal.
That's proteins, that's cheeses, that's vegetables,
that's all the salsas and sauces.
And for a customer that makes it exciting.
You know, they get lots of different things
they can customize their meal with.
The more limited menu in general
is better for restaurants and their profits.
It's less things to train the restaurant workers on.
It's less waste.
- [Narrator] Chipotle's founder Steve Ells
emphasized having an open kitchen.
He wanted customers to be able to see the ingredients
and preparation in front of them.
Today, employees work at individual stations
to serve already-prepared ingredients,
making the ordering process more efficient for customers.
- We can serve as many as 100 customers
within a 15-minute period.
What's a better way than telling people that it's fresh?
Showing them.
Let them come in and discover for themselves.
- [Narrator] This transparency has been very important
for Chipotle, especially after its food safety issues.
After several outbreaks of E. coli, Salmonella,
and Norovirus in Chipotle restaurants,
the company implemented several changes
like improving food preparation and storage procedures,
encouraging sick employees to stay at home,
and bringing on a new CEO, Brian Niccol.
- He really did emphasize
that they cleaned up their procedures.
Didn't happen immediately.
But with time, people start to forget things too.
There hasn't been the big high-profile scares
that there were previously.
- [Narrator] After several outbreaks between 2015 and 2018,
Chipotle's stock price took a hit.
However, its focus on its digital ordering platforms
helped drive up revenue and stock prices started to climb.
Back in 2008, Chipotle became one of the first
fast casual chains to create an online store pickup model.
In its first year, Chipotle's digital sales
accounted for $13 million, or just 1% of its total sales.
In 2022, digital sales grew to $3.4 billion.
That's now nearly 40% of Chipotle's
food and beverage revenue.
- If you're ordering online digitally,
that is made for you
at a whole separate part of the kitchen,
which is just dedicated to online orders.
- [Narrator] Chipotle's app and online ordering systems
were also vital during the pandemic.
- The pandemic obviously was terrible for all restaurants.
But Chipotle did have some advantages there
in that they had this whole digital ordering platform
really set up and scaled beforehand.
- When the pandemic first hit,
we saw that people stopped going to restaurants
for some period of time.
So we saw our sales drop pretty significantly.
But it only took, like, a week or two
before we started to see that
while they first stopped visiting restaurants,
the adoption of the digital ordering
really picked up very, very quickly.
And so I would say within the first four weeks,
we had our digital ordering soar from about 18%
to it at one point hit 70%.
- [Narrator] Chipotle also designed its stores
to have two separate prep stations called make lines.
One make line is just for in-store orders,
and the other is for digital and catering orders.
This made food pickups quicker
for customers who didn't want to spend time indoors.
- This idea that we had the digital make line
so that as people were ordering,
we could make food on their digital make line,
and also serve customers that were choosing to come in.
So it was a seamless experience.
Like most stocks during 2020,
they were still lower than they were before the pandemic.
But by the end of the first year into the second year,
most stocks had, you know, fully recovered.
We had our all time high in 2021.
- [Narrator] Recently, Chipotle has continued to expand
its digital ordering services
with a new pickup option for customers called Chipotlanes.
- Let's go ahead and offer all the convenience
of the drive-through, but when you order ahead of time,
you know exactly what time to come, and so there's no line.
You drive up and you pull to our window,
you get your food, and off you go.
- [Narrator] The first Chipotlane opened in 2018,
and there are already nearly 600 across the U.S.
Chipotle says at least 80% of new restaurant locations
opening in 2023 will have Chipotlanes.
But that's just one example of how Chipotle
has continued to innovate to attract customers.
- Social media has been great for us because
in addition to making sure we're serving,
you know, the meals that customers come
to expect at Chipotle,
we also want to be part of a culture.
- [Narrator] Chipotle frequently uses social media
to attract younger consumers by releasing recipe videos,
animated short films, Roblox games,
and social media campaigns
like the lid flip challenge with major influencers.
Chipotle has also used social media to drum up excitement
about new menu items and innovate its menu options
to keep up with consumer trends.
- Adding new things for customers
is very important to Chipotle,
and they have a whole process for this
where they try and try these items in-house
and really test and learn before they test in stores.
They like Menu News, whether it's, you know,
a steak item or a chicken item, Al Pastor, quesadillas.
They want to keep customers interested,
even if most of their menu is staying the same.
- [Narrator] So what's next for Chipotle?
- In general, the online ordering,
even when you pick it up in the restaurant,
is just much more efficient.
- [Narrator] The company says it wants to open
more locations that are only used for online pickup orders.
They won't have any seating for customers.
This will also cut down on labor costs,
since workers won't need to clean seating areas
and bathrooms as often.
- We think the idea is let the customers choose
which channel they want.
Now our job is to make sure every channel is convenient,
it's easy, it's fast,
so that we don't give any friction whatsoever.
But make sure every experience that you can provide
in every channel is a great one.
(gentle music)