The introduction earlier this month of Chipotle Mexican Grill Inc.’s (CMG, Financial) Chipotlane Digital Kitchen restaurant prototype – featuring a walk-up window for efficient digital order pickup – has investors honking their horns in approval.
Indeed, in the wake of the introduction, one Wall Street prognosticator has labeled Chipotle one of only two stocks to buy “when the next market crash comes.”
The initial unit, located in Cuyahoga Falls, Ohio, has just opened its doors -- or rather, its window.
The Chipotlane Digital Kitchen footprint is smaller than a traditional Chipotlane, with no dining room access for guests or a front line, the company said in a release. The kitchen is equipped with a make line dedicated to digital orders placed through the Chipotle app and Chipotle.com, as well as marketplace partners. Guests and delivery drivers can collect their digital orders through the Chipotlane drive-thru or walk-up window. The new restaurant will also offer patio seating for guests to enjoy their meals.
"Chipotlanes are a key growth strategy for the brand," Tabassum Zalotrawala, the company's chief development officer, said. "Our portfolio of approximately 300 Chipotlanes perform with the highest margins across the board, so we continue to evolve our restaurant design with formats such as the Chipotlane Digital Kitchen to best suit our growing digital business."
Since launching in early 2018, the Chipotlane format continues to enhance access, ease and satisfaction for guests while demonstrating strong performance, according to the chain. New restaurants featuring a Chipotlane open with approximately 15% higher sales compared to non-Chipotlanes opened during the same period.
With nearly 3,000 restaurants today and a long-term goal of having 6,000 locations in North America, Chipotle is continuing to learn and refine its approach to accelerate its Chipotlane portfolio judiciously. To date, the company has reconfigured 12 of its existing restaurants to feature the digital order pickup lane, with these locations seeing an increase in sales as more customers choose this convenient access channel.
Established only three years ago, Chipotle's digital orders now account for 42.8% of all sales, according to company executives. The transition to drive-thru orders at its popular Chipotlanes also continues driving sales, margins and returns. Of the 41 new restaurants it opened in the third quarter, 36 had a drive-thru, and of the 200 new restaurants it will open this year, 75% will have one.
CEO Brian Niccol noted in the announcement that Chipotle can expand its footprint to as many as 6,000 locations in North America with average unit volumes of $3 million. That translates into $18 billion in revenue, or two and a half times more than it's currently taking in, without including the potential for international growth.
Trading at 50 times next year's earnings estimates, executives noted, Chipotle Mexican Grill “has already priced the opportunity into its stock, making a pullback during a market crash an excellent time to swoop in and buy this premiere restaurant stock.”
Innovations like the Chipotlane concept are nothing new for the chain, which is recognized on Fortune's Most Admired Companies list.
