Despite Major Menu-Price Increases, Chipotle Crushes Earnings
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Chipotle took a major risk when It hiked menu prices last month, but now it looks like the decision is paying off.
Per the company’s new earnings report provided to Entrepreneur, the fast casual chain saw a whopping 38.7% increase in Q2 compared to Q2 in 2020, with revenue totaling $1.9 billion in the quarter that ended June 30, 2021.
The company’s restaurant-level operating market was the highest since Q3 of 2015.
Also notable was the company’s impressive 10.5% year over year increase in digital sales, which accounted for nearly 50% of all sales across restaurants. “A little more than half of the digital sales were from order ahead transactions as guests increasingly appreciate both the value and convenience offered by this channel,” the company said.
These online orders were driven in part by Chipotlanes — the company’s drive-thru lanes where customers can place a mobile or digital order ahead and pick up at the window. The addition of these lanes was an initiative that the chain doubled down on earlier this year amid the pandemic.
“Chipotle’s second-quarter results highlight the strength of our brand and our people, as we demonstrated growing momentum in the business,” Brian Niccol, Chairman and CEO of Chipotle said in a statement provided to Entrepreneur. “We remain confident in our key growth strategies and believe they will help us achieve our next goal of $3 million average unit volumes with industry leading returns on invested capital that improve as we continue to add Chipotlanes. Strong restaurant level economics combined with significant restaurant growth should allow us to optimize earnings power for many years to come.”
Making a shift to digital ordering works in favor for a company like Chipotle, where orders are all make-as-you-go, allowing an easy way for customers to simply click on the ingredients and options that they want as they go through the digital menu.
Chipotle also launched a digital-only quesadilla to its menu in March, an item that fans had dubbed on the "secret menu" for years before the restaurant finally made it a permanent fixture.
It was reported last month that the company would be increasing menu prices by a 4% in an attempt to help reimburse the company cost of raising worker wages to $15 an hour.
Industry-wide food shortages due to the pandemic are also partially to blame for the food price hikes, especially chains like Chipotle that work with locally sourced and organic ingredients.
The company also opened 56 new restaurants including one relocation, and closed five, with more than 80% of these new restaurants including a Chipotlane. The company is aiming to open a total of 200 new restaurants by the end of 2021.
Chipotle is forecasting “comparable restaurant sales growth in the low to mid double-digits range” for Q3.
The chain stock valuation was up a whopping 52.59% year over year by mid-Wednesday afternoon.