Want extra guac and side items with that? You can do that with the Chipotle’s mobile order and pay app as well as skipping the line at the Mexican grill restaurant. As the following article describes, the digital order channel has been a bright spot in otherwise disappointing sales for the chain.
Chipotle (NYSE: CMG) disappointed investors with its report and can’t seem to get its footing on the road to recovery. However, there’s one bright spot in the midst of these challenges: the company’s focus on its digital efforts. Digital ordering is fast becoming a “must have” for restaurants. Mobile “order ahead” for quick service restaurants could grow to $38 billion by 2020, according to Business Insider.
It’s been a year since Chipotle first announced a push to upgrade its digital capabilities. Since then, digital orders have taken off. And as the company beefs up its technology roadmap, it’s also speeding up the in-store improvements to make it all happen.
In the third quarter earnings call, Chipotle announced a plan to increase the number of orders it was receiving online and via the mobile app. At the time, this channel represented only 6% of revenue.
Since rolling out “smarter pickup times” in February, the company has seen a 51% increase in digital orders. Sales fulfilled through the second make line — a smaller work area behind the main customer counter that specifically processes online and catering orders — peaked at 8.5% in the second quarter before falling slightly to 8% in the third. That said, the highest volume stores are seeing up to 15% of revenue from digital orders. This success has encouraged the company to invest even more into these opportunities.
Mobile order and pay is definitely a growing sales channel, especially for quick service restaurants (QSRs). It may not be enough to rescue Chipotle from its sluggish sales in recent times. Digital ordering is now table stakes in the QSR category and the more successful mobile apps have an array of integrated features such as loyalty, target marketing, and partner offers. That would be one way for Chipotle to hasten their return to favor among diners and investors alike.
Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group
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