Here are three must-see quotes from the fast-casual chain's second-quarter earnings call.
Chipotle Mexican Grill (NYSE:CMG) has impressed investors in 2019, building on the momentum it saw last year. The company has notably achieved six consecutive quarters of accelerating comparable sales, with second-quarter comps coming in at 10%. Helping drive the fast-casual chain's results are revitalized efforts in marketing, restaurant efficiency, and digital.
To better understand what's behind the company's strong performance and its opportunities ahead, investors can turn to management's second-quarter earnings call. Though the call included lots of insightful information, three topics discussed during the call that are worth a closer look are Chipotle's rewards program, its digital sales, and management's teaser of potential new menu items.
Here are three key quotes from management on these topics.
Digital sales are soaring
Since Brian Niccol took the reins early last year as Chipotle's new CEO, the company has been relentlessly capitalizing on digital opportunities. Chipotle's efforts in digital have been broad-based, including streamlining online ordering, delivery, and catering, as well as improving the mobile app and launching a rewards program.
These efforts are helping digital sales climb sharply.
"Our customers are responding positively to our digital system, ... as it reduces friction and creates a convenient and enjoyable way for our guests to experience Chipotle," explained Niccol in Chipotle's second-quarter earnings call. "Overall, digital sales grew 99% year over year to $262 million during the quarter and represented 18.2% of sales."
Chipotle's rewards program is paying off
One aspect of Chipotle's digital efforts worth calling out is its recently launched rewards program. Debuted in March, the program has already garnered five million members, Niccol said. In addition, the program is quickly morphing into a catalyst for Chipotle's business.
"Early results are showing that members are increasing their frequency after joining the program," said Niccol. "The rewards program gives us a currency that we can use to incent behaviors and is a key enabler of our digital ecosystem moving forward."
Chipotle teases new menu items
Another way Chipotle is trying to improve its business is by innovating with menu items. To this end, the company announced "Lifestyle Bowls" in January. These bowls cater to different popular diets such as paleo and keto diets. The new menu items have been popular with customers. Chipotle has also been testing quesadillas, which are cooked in new ovens. This pilot has received positive feedback from customers.
Of course, Chipotle doesn't plan on stopping here. It wants to keep innovating with menu items. "The new ovens are helping to improve the quality and taste of the quesadillas and could potentially be a platform for other new menu items including desserts and nachos," said Niccol.
But investors shouldn't expect many meaningful changes to Chipotle's menu in the near term. The company wants to ensure it isn't sacrificing throughput for the sake of new items. "[W]e still have some work to do in order to streamline our workflow," Niccol added.
Quick: What was the last problem dropped on you yesterday, and what looming catastrophe kicked off today?
Restaurateurs often complain their days are spent lurching from one potential crisis to another, leaving little time to observe and digest what’s happening in the industry as a whole. Trends unfolding outside their four walls often go unnoticed until the resulting problem or opportunity has pushed its way inside.
We got your back, bunky. Here are three of those sleeper currents that merit a moment of consideration, even if the sink is clogged, the dishwasher didn’t show and a tour bus just pulled up outside.
Dinner is the challenge of the moment
Restaurants, or at least those of the chain variety, are continuing to see too few dining room seats being filled. But at least they’ve diagnosed the problem more precisely. Particularly for casual-dining operations, which have spent years trying to scrounge up any lunch business, the new challenge is drawing dine-in customers for dinner.
While same-store traffic for chain restaurants was down 2.8% overall from January through July, transactions fell on a comparable basis by 3.6% at dinner, according to Black Box Intelligence.
Applebee’s blamed its second quarter slide in same-store sales squarely on a drop-off at night. The issue, it said, was turning off bargain hunters, who make up about 20% of the casual giant’s customer base. “I believe our May-June performance could have been stronger had we introduced our new Loaded Fajitas with a compelling nationally advertised price point,” said President John Cywinski, referring to the $10.99 platter that was offered late in the quarter. “Bottom line, when we're aggressive on price, value seekers tend to be with us, and when we're not, they tend to seek a deal elsewhere.”
Applebee’s is now touting the first in a new line of hand-formed burgers, priced at $7.99 and served with unlimited fries.
Other casual chains are similarly touting new bargains. Chili’s Grill & Bar crowed about getting away from discounting, but it’s currently spotlighting the offer of a soft drink, appetizer and entree for $10 total, and plans to keep touting the bargain for some time to come.
Casual chains aren’t the only operations searching for ways to pull more guests in the evenings. The Freshii fast-casual brand is testing the dinnertime staples of roasted chicken breasts, turkey meatballs and vegetarian protein entrees at 30 stores, while simultaneously commencing a sales trial of plated meals.
Gee, that new menu item sounds familiar …
Grandpa used to say, “Everything old will be new again.” But he was old, cranky and going senile, so no one paid attention. Except, it seems, the menu planners rolling out promotional items for the second half of summer ’19. Turns out the novelty sought with grabbers such as faux meats and hard seltzers has given way to a reliance on nostalgia. Look at the menu draws being touted this month and you’ll see a bunch of geezers packaged up to sound new and desirable again.
Wendy’s is pushing spicy chicken nuggets again. Chick-fil-A said it was prompted by customer demand to resurrect its Smokehouse BBQ Bacon Sandwich and Strawberry Passion Tea Lemonade, while simultaneously introducing an actual new product, mac and cheese. Hardee’s brought back its kids meals, White Castle is pushing Chicken Rings again and Buffalo Wild Wings has resumed offering two-for-one wings on Tuesday nights.
And we’re just getting into the pumpkin spice coffee season.
Merchandise sales are back, and apparently XL
It’s apparently cool again to wear garb sporting the logos of restaurant chains, or at least the right restaurant chains. Why else would it be mainstream news that Taco Bell has revealed its new back-to-school clothing line? Now available in the Taco Shop, the quick-service chain’s online merchandise mart, are a branded hoodie, T-shirt and backpack. The line has been extended to include a flash drive that looks like a packet of hot sauce; memo pads; and pencils patterned after the sauce packets.
The Yum Brands holding isn’t the only restaurant chain that has found logoed merchandise to be a source of new revenues. A new array of “beer gear”—clothing for suds aficionados—proved a pleasant surprise for Granite City Food & Brewery. Meanwhile, any gathering of Los Angelenos shows how the love of In-N-Out translates into sales of the cult favorite's T-shirts. Clothing studded with the chain's logo is almost as prevalent as duds celebrating the Dodgers.
Some business owners find that they cannot juggle all of the necessary tasks without working around the clock. One way to reduce the burden is by outsourcing work to remote employees.
Indeed, many businesses have found that outsourcing not only saves time but can also drive profits.
Here are five ways that outsourcing can increase your company’s bottom line:
1. Lower Costs
Outsourcing can help you cut costs dramatically, especially because you do not have to hire full-time staff to perform business tasks.
Outsourcing to a smaller company or individuals allows you to save on benefits and taxes that you would otherwise have to pay if you have full-time employees.
Further, you can negotiate for great rates when you outsource work, which helps you cut costs and improve your company’s bottom line.
In Hong Kong, I have seen a trend in outsourcing software to Eastern Europe; this trend has been growing here for two reasons, (1) the cost to hire local software developers is extreme – small businesses are competing for talent against some of the world’s most deep pocketed financial firms – and, (2) talent, there is a lack of local talent that can get the job done at adequate quality in Hong Kong.
2. Increased Productivity
Outsourcing administrative and other non-productive tasks can free up time up and owners to concentrate on more productive activities such as marketing, developing strategy, networking, and coming up with new products and business ideas.
Increased productivity means greater sales, more revenue, and ultimately improves a company’s bottom line.
At my company Visichain, for example, I utilize remote workers for many ongoing tasks, including:
Bookkeeping, to India
Graphic Design, to Romania
Website Design, to Philippines
And, other one-off tasks to the best people where ever I can find them.
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3. Better Customer Service
Outsourcing the customer service function can result in happier customers who choose your company’s products and services time and again.
Also, happy customers are more likely to recommend your business to friends and family, which leads to more sales, greater revenue, and higher profits.
Another plus when outsourcing customer service for global operations is it allows for 24/7 support because you can utilize back office services that work around the clock. This can be a major service advantage especially for online businesses and companies that are competing against commodified services that don’t yet make the convenience of 24/7 availability an option.
4. Greater Investment
Outsourcing allows you to redirect money you would have used to pay full-time staff into other productive activities such as purchasing more stock or investing in machinery and other assets that grow your business.
And, as Chris Pentago has noted in another article here on Business 2 Community, Strategic Outsourcing Can Lift the ROI of a Small Business.
5. Increased Revenues
Outsourcing business processes allows you and your existing staff to concentrate on activities that bring in customers and drive revenues up.
Increased revenues have a direct impact on your company’s bottom line and allow you to drive up your profit margins.
Since staff is free from having to perform mundane tasks such as data entry or customer service, they can focus on meeting more clients, making more cold calls, networking, and other activities that increase revenue.
When done correctly, outsourcing can increase your bottom line.
Your office staff are more productive due to the reduced workload and you can use the extra money to invest in your company.
When you are considering outsourcing, take a look at the daily tasks and select ones that do not need to be done in the workplace.
Catch up on my current posts along with industry articles