Chipotle's (CMG) growth strategy may depend on more finger-food orders — at the touch of a finger.
Digital-forward customers are prompting the fast-casual food chain to beef up its loyalty rewards program and expand it beyond the U.S., beginning in Canada, where the chain has about 30 locations.
"In the U.S., we've had our loyalty plan for a little over three years now. We have 28 million members. And the thing that's most attractive to us is we can have a more personalized one-to-one relationship with these 28 million customers," Chipotle CFO Jack Hartung told Yahoo Finance. "And what we find when we look at our customers who join loyalty versus don't join loyalty, those who join loyalty after they join, they come to Chipotle more often. And they spend more when they come."
Chipotle launched its rewards program in 2019 under the then–newly installed CEO Brian Niccol, just months ahead of the COVID-19 pandemic that would prompt consumers to lean on mobile device ordering, drive-through and delivery experiences.
"During the pandemic… our [digital] business went from 15%-17% up to 70% [of total sales]. So that gave us a really good idea about how quickly our system could pivot as our customers were seeking additional outlets and wanted the touchless experience," Hartung said.
Earnings results from the first quarter of 2022 revealed that digital sales represented 41.9% of food and beverage revenue for the company — double its pre-pandemic digital performance. On a store basis, when Chipotle opens a drive-through 'Chipotlane,' digital sales account for 50-55% of total sales. "You order ahead. You pay ahead. You just drive up," explained Hartung.
‘Guacamole attachment rate’
Gleaning insights from digital customer data allows brands who manage the customer experience through mobile applications — accompanied by loyalty programs — to better track effectiveness of menu items while calculating the near-term product supply necessary to fulfill orders.
One such example is avocados, for which prices have surged amid tightening supplies in Mexico. In the walls of Chipotle, a measurement among the executive offices is the Guacamole Attachment Rate. This is the percentage of orders that either opt for guacamole on a menu item or an order that adds guacamole and chips out of the total that the company completes over a period of time.
"Our customers get guacamole either in their bowl or on the side with chips more than 50% of the time. So more than half the customers that come in, guacamole is part of their order. We haven't seen that go down at all. Our customers really do love our guacamole. ... Our customers, they're not giving that up right now.
Chipotle anticipates its menu price increases will dampen commodity inflation pressures, allowing restaurant level margins to hit 25% during the second quarter.
Bradley Smith is an anchor at Yahoo Finance. Follow him on Twitter @thebradsmith.