NEW YORK — Executives at Chipotle Mexican Grill understandably focused on food safety this year. Now, the chain also will stress enhancing the guest experience as it hopes to increase the number of higher frequency customers.
Denver-based Chipotle in 2016 is experiencing the most challenging year in its history following E. coli outbreaks late in 2015, said Steve Ells, chairman and co-chief executive officer, Dec. 6 at the Barclays 2016 Eat, Sleep, Play — It’s Not All Discretionary Conference in New York.
Promising turnaround data has appeared. The chain in July began to gain more customers than it was losing, Mr. Ells said.
|Steve Ells, chairman and co-c.e.o. of Chipotle|
“Our marketing and promotions have successfully attracted 33 million new or lapsed customers to Chipotle over the last six months,” Mr. Ells said. “These are key signals that we’ve begun to turn the corner, but nevertheless, I’m not satisfied with the rate of recovery.
“I’m particularly not satisfied with the quality of the experience in some of our restaurants. While the majority of our restaurants are running well, some are not delivering a terrific guest experience. When we invite new or lapsed customers into restaurants that are less than perfect, we believe those customers will return less frequently and that we will needlessly slow our recovery by allowing that to happen. Therefore, we are focused relentlessly on creating an excellent dining experience in every one of our restaurants.”
Post-crisis, Chipotle designed a food safety system that would prevent another outbreak, he said. Typically the company has about eight significant operational challenges for its restaurant teams to learn. This year was different.
“Post-crisis, we threw 80 changes at them,” Mr. Ells said. “So it was very, very difficult, and turnover went up. We had higher turnover. The jobs became more difficult for our managers and for our crew members, and I think we took our eye off the ball on the customer service side.”
He said customer service may involve throughput through the store as well as no leftover napkins on tables, clean and organized drink stations, and no fingerprints on the front door glass.
Chipotle grades its restaurants, he said. About half receive A’s or B’s. The restaurants in the other half receive C’s, D’s or F’s with a majority of those receiving C’s. The restaurants in the second half tend to cluster around the Northeast.
“We have addressed that specifically, though, with new management teams, but I think there’s a great opportunity in these C restaurants to have an experience that’s going to bring people back more frequently and help with this recovery,” Mr. Ells said.
Comparable restaurant sales declined 22% in the third quarter ended Sept. 30 when compared to the third quarter of the previous year. The drop compared to declines of 30% in the first quarter and 24% in the second quarter. Sales have recovered at about 1% per month over the past 10 months, Mr. Ells said, but the recovery is uneven and difficult to predict. Different parts of the country are recovering at different rates.
A small number of customers represent a large percentage of Chipotle sales, said Mark Crumpacker, chief marketing and development officer. Over time, some people may become less frequent visitors, but other people move into the higher frequency group.
|Mark Crumpacker, chief marketing and development officer for Chipotle|
“When you look at 2016, the first half of 2016 wiped out the incoming generation of customers,” he said. “During January and February was not a time (when) a lot of people were saying, ‘Hey, I think I’m going to make this my first time to visit Chipotle.’ And the result of that was eliminating almost all, in some cases, of our infrequent customers. Up to 78% of our least frequent customers stopped coming to Chipotle, and there was virtually no inflow of new customers during that period of time.”
The second half of the year has seen a healthy inflow of customers, but they have yet to progress up into the higher frequency levels, he said.
Improving on-line customer service is a focus, too. A pick-up time during peak hours could be 45 minutes to an hour, said Curt Garner, chief information officer.
|Curt Garner, c.i.o. for Chipotle|
“Historically, we relied upon our management team to use intuition and wisdom to understand what their order queue looked like and how long it would take to prepare an order,” he said. “Now we’re applying technology, and we’re doing it finitely, in that we can look at every restaurant individually, look at their order queue and how quickly that restaurant makes orders, to come up with a much better predictor of how long it will take to provide the customer with their order.“We’ve rolled this out, now, into approximately 200 restaurants, as a test. We plan to deploy this technology to the rest of our restaurants within the first quarter, and we’re seeing, in those test restaurants, a pick-up time that is approximately 60% quicker, or faster, than what we’re seeing in our control restaurants. So the average pickup time in these test restaurants is somewhere in the range of 16 minutes now.”