Restaurants

Chipotle is adding drive-thru lanes, but you can't order food at them

Key Points
  • Mobile drive-thru windows are cropping up at Chipotle restaurants across the country, allowing customers the option of staying in their cars to get their burritos and bowls.
  • Chipotle stores in Ohio, Tennessee, Texas, and Massachusetts already offer this feature, but more are coming.
  • Chipotle will have to ensure that it can get customers through the line quickly and that the food will be hot when it is picked up.
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Chipotle adds mobile order drive-thru lanes

Chipotle Mexican Grill is systematically adding drive-thru lanes to some of its new locations, but you won't be able to place an order at any of them.

The burrito chain has dealt with a very public three-year-long sales slump that crippled its stock price. To revitalize its sales and encourage diners to return, the brand has implemented strategies like digital ordering, delivery and adding new menu items that it hasn't pursued aggressively in the past.

Drive-thru windows are cropping up at Chipotle restaurants across the country, allowing customers the option of staying in their cars to get their burritos and bowls.

However, these drive-thrus are a little different from the typical fast food order and pick-up lane. Here customers don't order their food through a microphone, they do it ahead of time through Chipotle's app or an online form.

Diners are provided with a pick-up time once they place their order and can drive through the mobile order lane to grab their meal without having to go inside the store.

"[CEO] Brian [Niccol] has said very well that Chipotle has this huge opportunity ahead of us as it relates to access," Curt Garner, chief digital and information officer at Chipotle, told CNBC. "We still only have 2,500 locations. There are plenty of places and occasions for us to continue to grow into. But as we've looked at access, we've also looked at it in terms of different restaurant formats and these mobile drive-thru pick-up restaurants are part of that."

So far, Chipotle has five of these locations in the U.S. There are two stores in Ohio, and single stores in Tennessee, Texas and Massachusetts. But more are coming.

"As we are looking at our real estate pipeline, part of the criteria that has been introduced is to understand how many of those sites might lend themselves to that experience, even if we don't open them immediately with [the mobile lane] enabled," he said.

In Virginia, a new Chipotle outfitted with this mobile pick-up lane is expected to open by the end of the year, a person familiar with the matter told CNBC.

Convenience is king

"The idea of having a mobile pick-up station or a dedicated lane makes a lot of sense because anything that makes it more convenient for the guest has been proven to drive sales," Peter Saleh, analyst at BTIG, told CNBC.

For many Chipotle customers who have sampled the restaurant's menu and have a go-to order, the experience of walking down the line and picking out burrito toppings is no longer an amenity, but an obstacle, Garner said. For these diners, it is more convenient to place an order via an app or website and stroll in or drive by to pick it up.

Digital orders typically take about 12 minutes to be filled, Garner said. Although, those who use the app can order a meal hours in advance, selecting the specific time they want to pick it up when they place their order.

Garner said Chipotle receives thousands of digital orders before its restaurants even open as people reserve a lunchtime slot to come in and grab their burritos and bowls.

To meet this demand, Chipotle has installed second food lines in the back of all but about 100 of its stores. These lines are manned by two employees, instead of the typical five to seven that a front line would have and are situated near the grill.

The line is about 8 feet long and 2.5 feet wide with heated shelves and an area for food storage.

"The second 'make' line is one of the aspects of Chipotle that I think is a really significant competitive advantage as it relates to digital, Garner said. "One of the problems that companies have struggled with for a long time is having digital orders or any sort of out-of-store order come in and interrupt the flow on the main line that is servicing customers in person."

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Chipotle, in adding these mobile order lanes, will have to ensure that it can get customers through the line quickly and that the food will be hot when it is picked up.

"Convenience is king," David Henkes, managing partner at Technomic, told CNBC. "The challenge is in logistics. If you don't do it well, you are going to essentially turn off more customers than you are bringing in."

For Chipotle, that means adding things like dedicated parking spaces for mobile users who arrive before their order is prepared and texting customers when the meal is ready to be picked up.

Invisible demand

At Chipotle, mobile orders have created a new problem for kitchen mangers — invisible demand.

"You have to be able to have a balance," Daniel Bendas, managing partner at Synergy Consultants, which worked with Dunkin' in designing its mobile lane, told CNBC. "You can get as many orders as fast as you want, but you have to build the capacity in the kitchen to handle it ... the back of house has to predict volumes."

Dunkin' Donuts opened a mobile order pick-up lane in February at its Quincy, Massachusetts, location.

Normally, kitchen managers man the grill, cooking up chicken and rice based on the line that forms behind the counter. However, when the orders come from people who aren't in the building, managers have to rely on data to know how much food to prep during different times of day.

Another pressure point that Chipotle has encountered is that peak hours for mobile orders don't always align with peak hours in-store. While some of these digital orders will come in during the lunch or dinner rush, folks who are ordering online often order later in the evening or heavily on the weekends. So, Chipotle has had to staff its restaurants differently to meet this new demand.

The digital dilemma 

Digital ordering, orders made online or via a mobile device, have become a bigger piece of restaurant industry sales in the last few years. However, it's still not a huge portion of restaurant sales.

"The problem with doing it through a drive-thru or dedicated window is most of the quick-service restaurants and even the fast-casual guys still have a very low digital percentage penetration," Saleh said. "Most are sub-10 percent. So, to have to dedicate that much real estate to just digital orders probably isn't very productive yet."

At Chipotle, digital orders accounted for 8.8 percent of total sales in the last quarter, up 40 percent from a year ago, Garner said. A Chipotle employee told CNBC that in-store orders total about $10,000 per day at his restaurant, while take-out orders are about $1,000. The employee wished to be unidentified because the information is confidential.

While digital orders are less than a tenth of the company's total sales now, Chipotle expects the number of such orders to grow, Garner said. He declined to offer a specific figure, noting that Chipotle executives will shed more light on the matter during a special investor call June 27.

While digital sales may be fewer in number, these orders have a higher average check compared with in-store purchases

"I think [mobile order lanes] will become the new norm for quick-service and fast-causal chains," Jason Kaplan owner and CEO of JK Consulting, told CNBC.