Here's Chipotle's plan to win customers back this year

Brighter future for Chipotle?
Brighter future for Chipotle?

Chipotle's woes may not be behind it just yet. The burrito chain still has plenty of work ahead to persuade diners to come back to its stores.

After what CEO Steve Ells called the "most challenging [year] we've ever faced in our 23-year history," sales at the chain's established stores turned positive in December for the first month in more than a year. They had been in a downward spiral since last October, when news broke about its highly publicized E. coli outbreak.

With comparable sales now trending in the right direction — albeit off a 30 percent decline in the prior-year period — Chipotle's management laid out its plans to continue growing these revenues next year, while saving $100 million in costs.

The strategy was first outlined at the ICR Conference in Orlando, Florida, in January and was elaborated on during an earnings conference call Thursday.

"Returning to our roots of what originally made Chipotle great has helped refocus all of our strategies toward the guest experience," Ells said in a statement Thursday. "In the upcoming year we intend to continue to simplify and improve our restaurant operations, utilize creative marketing to rebuild our brand, and further the roll-out of our digital sales efforts."

With this plan in place, Chipotle expects it will be able to turnaround its same-store sales and post increases in the high-single digits this year.

Here are five ways the company plans to reel in more customers.

Promote digital ordering

Chipotle has been tweaking its online ordering technologies, and recently started promoting these easier-to-use tools. The campaign follows its launch of more accurate pickup times, which rolled out across more than 1,000 shops in December. The remaining 1,000-plus Chipotle locations will get this capability in the first quarter.

By narrowing the pickup window — and trimming the amount of time it takes to put together online orders — the stores that have rolled out this upgrade have seen a lift in visits to its website. These stores have also turned more digital visitors into buyers.

Remote orders account for roughly 7 percent of Chipotle's sales, and could lead to an additional 130 orders being made in an hour without any extra labor, the company said.

Mobile order and pay apps promise more convenience for customers and restaurant staff alike. However, few chains are equipped to deal with patrons speeding through the checkout.

Starbucks disclosed that the increase in user volume and crowding at pickup stations caused incoming customers to leave without making purchases. Chipotle, however, said that that will not be a problem for its chains.

The burrito company plans to add $2 million worth of additional labor to its stores to deal with influxes in mobile and digital orders.

Make its stores run more smoothly

One of Chipotle's founding principles was simplicity. But as its operations grew, so did its complexity.

Under its previous strategy, employees were rewarded for how well they performed against 27 measures — most of which were not related to serving the customer, Ells said at ICR. That led to complaints about slow lines and dirty stores.

Now, the chain is telling workers to focus on five strategies, three of which relate directly to customer service.

Chipotle is seeking to deliver the best possible customer service, believing this to be the key in driving infrequent customers into becoming more frequent customers.

The company is also making changes to its hiring process, which previously required all members of a store's team to meet every candidate. While well-intended, that policy often pulled workers off the food service line at peak hours.

It was also time-consuming, as an average 17 candidates were interviewed for each open position. And because the process took an average five days, Chipotle lost some labor to competitors.

Bring back former customers

Even as Chipotle has made progress attracting new customers, it's struggled to bring former diners back into its stores. The chain is targeting some 60 million customers who have either stopped visiting its restaurants or go infrequently. It will also launch a scripted TV series for kids, focused on real ingredients.

Though the company plans to spend less on marketing and promotions as a percent of sales, it will run ads more consistently throughout the year.

"Over the second half of 2016 we attracted millions of new or lapsed customers and we are pleased with the rate that these new customers are converting from new or lapsed to regular customers," Ells said on the conference call Thursday.

Hold more fundraising events

Group visits to Chipotle have mostly returned, thanks to a lift in online orders and catering. But fundraising events are another way the company can attract large chunks of customers at once, management said.

An added bonus: 40 percent of customers who come in for a fundraiser haven't been there in six months.

Tweak its menu

New menu items will not be a significant driver of Chipotle's business, as they can add complexity to its operations and slow down the line.

However, the chain is testing a dessert item that adds only one ingredient not already found in its stores. If the secret menu item gets the green light, it would be released in the spring.

Chipotle may also test some higher prices, but not in the near term, the company said Thursday.

Ells noted during the conference call that the company has eaten a lot of the labor and food cost increases and that its menu pricing has lagged behind. However, it doesn't plan "jam a very high menu in crease" to on customers.

"That's never been our strategy, we have always wanted to be accessible to the masses. We want to remain affordable," he said.

Chipotle misses on top & bottom lines
Chipotle misses on top & bottom lines

(UPDATE: This story was originally published in January, but was updated to reflect the latest comments from the company after its fourth-quarter earnings release.)