Why Only Chipotle Thrives While Other US Food Chains Struggle...

Online Drives Sales Growth

Online Orders Surge 81% Compared to Same Period Last Year

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jaehee] Chipotle Mexican Grill (Chipotle), a U.S. food chain, is drawing attention for being the only company to achieve growth amid the restaurant industry, which has been severely impacted by the COVID-19 pandemic.

According to CNBC on the 21st (local time), Chipotle's sales in the first quarter of this year reached $1.41 billion (approximately 1.74 trillion KRW), marking a 7.8% increase compared to the same period last year. This contrasts with Yum Brands, the largest U.S. restaurant company owning KFC, Pizza Hut, and Taco Bell, which reported massive operating losses.

Chipotle's strong performance is driven by online sales, which account for one-quarter of total revenue and surged 81% compared to the same period last year. This increase is a result of the social distancing measures due to COVID-19, which caused a sharp rise in online orders. However, in-store sales declined by 16% in March, resulting in only a 3.3% increase in store sales for the first quarter.

As the restaurant industry was hit hard by COVID-19, Chipotle's unique strong performance led to a 6% rise in its stock price during after-hours trading. Goldman Sachs selected Chipotle as a recommended stock, stating, "Although Chipotle is in the restaurant industry, it has strengths in online sales and an excellent delivery network." They added, "With an advanced delivery system, the impact of COVID-19 has been minimal, and once the pandemic stabilizes and the restaurant industry returns to normal, Chipotle is expected to further increase its market share."

Since hiring Brian Niccol as CEO from competitor Taco Bell in 2018, Chipotle has focused on online channels. As part of its digital strategy, it revamped its mobile application and partnered with delivery services such as DoorDash, Uber Eats, and Postmates to boost sales through delivery apps. Recently, it also added a 'Chipotlane' feature to its app, a drive-thru style service.

After U.S. state governments issued stay-at-home recommendations, Chipotle's online orders more than doubled, prompting the company to offer free delivery starting from the 15th of last month.

The 'ghost kitchen' dedicated exclusively to online orders also contributed to Chipotle's growth. With over 1,700 locations nationwide, when an online order is placed, food is prepared not in the in-store kitchen but in a kitchen dedicated solely to online orders. This system, known as a 'ghost kitchen,' avoids conflicts with in-store orders, enabling fast and fresh food delivery.

CEO Niccol said, "Chipotle has a separate kitchen responsible only for online orders," adding, "Because food is prepared immediately upon order, it aligns with Chipotle's slogan of 'healthy fast food.'"

Meanwhile, investment advisory firm Cowen & Company also forecasted that off-premise sales will drive growth in the restaurant industry over the next five years.

This content was produced with the assistance of AI translation services.