During Chipotle’s Q2 earnings call on Tuesday afternoon, there was a lot of talk surrounding “throughput” and the company’s efforts to improve it.
Why it matters is simple: Chipotle saw a 10.1% increase in same-store sales in the quarter and remained largely insulated from the current inflationary pressures hitting consumers’ wallets. But there’s still a lot to do, especially if Chipotle can serve even more meals to more customers throughout the day. This means accelerating the restaurant manufacturing line and the second, the digital manufacturing line.
This process, however, is easier said than done in an industry struggling to find employment.
That said, restaurant manager Scott Boatwright has a game plan.
“We just launched Project Square One, and that’s literally it. Let’s go back to square one on how we deliver great fundamentals of high throughput,” Boatwright said in a Tuesday night phone interview. “The nuances of good flow include teaching team members on the line how to deliver a great experience and keep moving, listening with both ears, politely handing items to the next team member. The little things add up during a peak volume window and make us much more efficient.”
Chipotle was on course for peak throughput in 2019 after Boatwright and his team introduced a training program specifically focused on the basics of operations. This training included defining the positions needed to fulfill orders efficiently, positions like shippers, which can move items down the line up to 20-30% faster.
In 2019, however, digital sales made up only about 20% of Chipotle’s mix. Today, the company remains well above 35% on digital sales, even as its restaurant sales return closer to pre-pandemic levels. Restaurant sales increased by 36% in the quarter.
This has essentially created two separate multi-billion dollar businesses within the company which has become a bit of a challenge as the team members have spent the past year and a half mostly focusing solely on digital .
“What happened, when we lost business in restaurants during Covid and went digital, those things like throughput were no longer important. After two years, we have new team members and new managers in the business who can’t remember the quality of the throughput on the line or how to manage it,” Boatwright said. “When our restaurant recovery started about eight or nine months ago, it became apparent to me that we just weren’t there.”
The need to be ‘there’ has become even more critical as Chipotle seeks to more than double its footprint, with most new units including a mobile-operated Chipotlane in advance, and the chain aspires to reach 3 million in average unit volumes, from the current $2.8 million.
In addition to launching Project Square One, Chipotle has also implemented several other elements to maximize operational efficiency. Field leaders sometimes work “side by side” with team members during peak hours, for example.
Chipotle has also implemented a time tracking and labor delivery tool to ensure that staffing is maximized at the right time. The tool’s planning capabilities are aided by machine learning, which means it takes into account considerations such as promotional events and weather.
The company is also installing a new POS system to streamline the ordering process for team members, and a new pinpad system to allow customers a faster, contactless checkout option.
“All of these things are more efficient and easier for team members and for customers and they save time on ordering,” Boatwright explained.
Of course, there’s also the idea of automation — which Chipotle has enthusiastically embraced — to save time and labor. In May, the chain announced it was testing a robot named Chippy to help make tortillas. And, last week, Chipotle announced an investment in Hyphena catering platform that automates kitchen operations.
Boatwright said Hyphen has the potential to place digital orders automatically, while Chippy removes mundane tasks from team members’ workloads.
“If you envision a future state, you can predictably see digital controls entering our ecosystem and Hyphen recognizing and preparing a bowl in real time. This will reduce labor on the line, create better precision and portioning, and overall a more efficient process,” he said. “We think it’s a great idea.”
It’s also a different position than some Chipotle peers. During McDonald’s second-quarter earnings call on Tuesday, for example, CEO Chris Kempczinski said automation won’t be a “quick fix” and the idea of robots isn’t practical for the majority of its restaurants.
Conversely, Chipotle strives to find emerging technologies to incorporate into its operations. The company launched a $50 million “Cultivate Next” fund in the spring to provide investments with companies that align with Chipotle’s mission, and Hyphen is part of that fund. Operational efficiency in general is a priority.
According to Boatwright, Chipotle is well positioned to consider emerging technologies, perhaps more so than its peers.
“I think a lot of peers are entrenched and saturated and that’s caused them to not think about innovation in the right way. I also think we have an advantage because we’re owned by the company and we don’t we don’t have a franchise community that might be afraid of the unknown,” he said. “We’re at 3,000 restaurants and we’re heading towards 7,000 and we have a great opportunity to really build the Chipotle of the future The ideas we want to look at are born in restaurants and respond to the problems we want to solve.”