Chipotle Announces Growth Strategies Focused On Winning Today and Cultivating a Better Future
Plan will involve the closure of 55 to 65 restaurants over the next 30 days
2018 seems to be a challenging year for Chipotle Mexican Grill, Inc. (NYSE: CMG) after the company announced that it is closing more than 60 restaurants over the next 30 days.
Chipotle Mexican Grill has announced its plans to execute a growth driven turnaround and outlined its path to real performance which includes a clear strategy, strong enabling structure and a new supporting culture. The company shared the following five focus areas to drive sales and transactions on its special investor call:
Becoming a more culturally relevant and engaging brand to grow love and loyalty;
Digitizing and modernizing the restaurant experience to be more convenient and enjoyable for customers;
Running great restaurants with great hospitality and throughput;
Being disciplined and focused to enhance the company’s powerful economic model; and
Building a great supporting culture as Chipotle innovates and executes across digital, access, menu and the restaurant experience.
“All our efforts will focus on making the brand more engaging, visible, and culturally relevant while our restaurant teams are dedicated to providing an excellent guest experience with great hospitality and real food cooked to perfection. Specifically, this will include three big initiatives – revamping our marketing communications and plans, leveraging our second make line to grow digital sales and expand access, and engaging with our customers by launching a new loyalty program in 2019,” said Brian Niccol, chief executive officer.
The company plans to grow the business by leveraging its strengths of great tasting, classically-cooked food made from real ingredients, its compelling value proposition, strong new restaurant unit economics, and an efficient digitized second make line. By modernizing and digitizing restaurants, customers will have easier access to Chipotle and experience improved order accuracy.
“We believe our digital business has a long runway for growth and ultimately can be a multi-billion-dollar business,” added Niccol.
As part of its growth plan, Chipotle will add excitement around the menu by building a pipeline of delicious menu items that drive new customer visits, are operationally easy to execute, and enhance the ability to drive great throughput. Chipotle is also modernizing its organizational structure by consolidating its work force in two office locations and adding experienced talent in key areas such as marketing, CRM, menu innovation, digital, data analytics and human resources.
“I can easily see a future where Chipotle more than doubles the business to $10 billion in revenue. We will execute flawlessly in our existing restaurants, add more high-performing restaurants, build brand relevance and engagement, expand digital capabilities for team members and customers, and build an organization with top tier talent that can win today and cultivate a better future,” said Niccol.
Expectations are that all of these initiatives across marketing, digital, consumer access, menu, analytics, and operations combined will create a flywheel that can sustainably drive transactions, improve unit economics, accelerate earnings growth and create significant shareholder value.
“While it’s too early to predict the timing and precise impact each of these strategies will have on results, I’m confident that these strategies will lead to higher average unit volumes and margins in the future. We know that the combination of great operations, clever marketing, and pushing further into our digital initiatives can drive near term sales growth,” said Jack Hartung, chief financial officer.
The restructuring to execute on the strategy will require changes to the organization and to the culture, which will result in non-recurring charges during the second quarter, and over the next several quarters. These non-recurring costs primarily relate to the moving of offices, the restructuring of the organization, and closing underperforming restaurants. In aggregate, Chipotle expects these costs, together with a small amount of other unusual items, to be in the range of $115 million to $135 million.
Chipotle plans to release second quarter results after the market closes on July 26, 2018.
The company has more than 2,400 restaurants as of March 31, 2018 in the United States, Canada, the United Kingdom, France and Germany and is the only restaurant company of its size that owns and operates all its restaurants.