Chipotle is unleashing a secret weapon to hopefully end one of its biggest customer problems
Comb through any Chipotle (CMG) earnings call transcripts from the past five years and you are likely to see one word more than a few times: throughput.
For Chipotle and other fast-casual restaurants, throughput is the speed at which customer orders are satisfied. Chipotle has long had an issue with speedy throughput, especially during the busy dinner hours.
A customer waits in Chipotle's line, carefully walks down the service line to pick ingredients for a burrito or bowl, and then pays at the cash register. It could be quite a time investment because many customers are unsure about what they want to order while others will order double of an ingredient (usually meat and chicken), slowing up the line and triggering out-of-stocks.
Customers sometimes will be upset and, at worst, leave the store entirely because the line is too long. Either way, the issue has held back Chipotle's fullest profit potential, many experts contend.
However, Chipotle appears to be on the cusp of fixing this longtime problem — maybe.
The company's CFO Jack Hartung confirmed to Yahoo Finance Live (video above) it's rolling out a new double-sided grill to cook chicken and steak faster. The new grill will be installed in 10 additional Chipotle restaurants in the second quarter after a successful pilot test earlier this year.
"Now the chicken you get is going to be coming from the grill even faster and even fresher," Hartung said. "It means it's going to be juicier because it's going to be cooked to the exact right temperature, and we are not going to have the yield loss, which means our economic model and our ability to continue to deliver value to our customers is going to be better than ever."
In other words, Chipotle isn't clucking around anymore when it comes to speeding up its lines.
Bernstein analyst Danilo Gargiulo told Yahoo Finance the new grill has "good potential" for Chipotle in three areas:
"Throughput improvement: faster line since cooking times are reduced (from 12-13 min to 2-3 min) and staffing the grill has historically been complex."
"Better customer experience, given the higher level of cooking consistency: big deal for a company that has to prepare from scratch their food across 3,000 locations."
"Better item availability: with faster preparation time, customers may choose to wait rather than walk out of the store if charred chicken is temporarily unavailable."
Not that any of this showed up materially in the first quarter for Chipotle.
Chipotle's first quarter same-store sales surged 10.9%, easily beating estimates for an 8.5% increase.
Hartung told Yahoo Finance that consumers didn't blink at higher prices for burritos and bowls.
"1Q23 did much to assuage lingering concerns about Chipotle Mexican Grill's comp sustainability," Bank of America analyst Sara Senatore wrote in a client note. "Mid-single digit percentage traffic growth — continuing into April — is consistent with our established view that last year's price increases did not permanently impair the brand."
"Likewise, after concerns about CMG's ability to continue to drive comps with limited-time offerings/menu innovation, recent launches are a reminder that the stage gate process works," Senatore continued. "Veggie fajitas are now a permanent menu item and the global chicken al pastor limited-time offering is tracking ahead of all prior protein limited-time offerings."
Now bring on those new grills.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com
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