Chipotle’s lower-income guests are coming back.
After seeing some inflation-weary guests reduce their visits in the second half of last year—a likely response to the chain’s menu-price increases—those lower-income diners were coming back more frequently than they had been over the prior six months, though not quite as often as they were visiting a year ago, the company said Tuesday. Higher-income guests remained loyal, even increasing visits last year, as the chain battled rising commodity costs with menu price hikes.
And, at least for now, there are no plans to increase menu prices further this year, though inflation remains “a wildcard.” CEO Brian Niccol said Chipotle still has room to pull that pricing lever if necessary.
Chipotle’s transaction trends were positive (“4% ish”) throughout the quarter and continued into April. For the March 31-ended quarter, comparable sales increased 10.9%, and the company is expecting same-store sales increases in the mid-to-high single-digit range for the year. That was also the projection for the second quarter.
Revenues increased 17.2% to $2.4 billion. Contributing to the strong results in part was the outstanding success of a TikTok-fueled promotion around the Fajita Quesadilla—now a permanent menu item—that launched as an LTO in March. The result of a menu hack made famous by Keith Lee and Alexis Frost and rolled out as a digital-only offering, the promotion doubled the chain’s quesadilla sales and fueled the brand’s highest digital sales numbers for two days.
Chicken Al Pastor, another LTO during the quarter, also was a hit, though Niccol said the company has yet to decide whether it will be made permanent.
Perhaps more than other factors, Niccol said Chipotle’s “back-to-basics” efforts to improve operations are paying off. Crew members are getting more experienced. Makelines are running out of guac, chips and chicken less often. Both makelines stay open from when a restaurant opens until close. Those and other improvements have helped boost throughput.
There’s still work to be done on better management of peak periods, and the company is testing potential solutions, Niccol said. “We have noticed that when the digital makeline gets busy, our managers tend to pull a crew member from the front line to help, which is impacting throughput,” he said.
Overall, however, the chain’s labor force is more stable, he said. “We had another outstanding quarter for turnover with both hourly and salary metrics being some of the best I’ve seen in five years,” said Niccol.
Chipotle rolled out digital tipping during the quarter. And the team in general is responding to the focus on being brilliant at the basics, he said. “Our teams love to be held to a high standard because when you achieve it, you feel like you’re part of a winning team with the ability to be rewarded through bonuses and growth within the organization. We are all starting to feel this again in our culture and in our people.”
Several tech investments have also begun to get traction.
Chipotle is testing new clamshell grills, and that test will be expanded to 10 more locations as it goes through the stage-gate process for validation. So far, the grills have reduced chicken cooking times from about 12 to 13 minutes to about three, while still giving the meat the desired sear.
Chipotle has also rolled out more-advanced location-based technology for its app. Now guests are alerted if they put in a digital order for pickup and then head to the wrong restaurant—a common problem. Niccol said that move alone has significantly reduced the need for refunds.
Chipotle has also invested in a tech company that is developing an automated makeline that Niccol said could further speed throughput and improve accuracy, though he did not indicate whether a test was imminent.
Looking ahead, Chipotle CFO Jack Hartung said he was “cautiously optimistic” about the macroeconomic climate. Other restaurant operators are wary of a possible recession, but Chipotle sees the return of lower-income guests as a positive sign, as is continued low unemployment and strong consumer spending.
“Our base case does not include a recession, or certainly not a meaningful recession,” said Hartung.
If a recession comes, Chipotle will be ready to ride out a couple of tough quarters, if necessary, he said.
“We certainly think we have the financial wherewithal, and we have the long term-view to do that,” he said. “But again, we’re cautiously optimistic that the economy will hold up.”
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.