Chipotle is switching up the model that made it famous as it embraces changing consumer habits

• Chipotle is growing its digital business, which makes up nearly half of all orders.
• The chain is also pivoting to rely more on drive-thrus, which offer higher margins.

Chipotle just shared record earnings for the third quarter of 2021, and it shows that the fast-casual chain is changing its business model.

Chipotle first grew popular with customized burritos and burrito bowls made behind an assembly line, where customers could point directly to ingredients on the assembly line, a similar model pioneered by Subway. Now, digital orders and drive-thrus have become priorities for the chain.

Digital sales made up nearly half of all orders in the third quarter, at 42.8% of sales for $840.4 million. They were up 8.6% over the same period in 2020, which was the year digital orders really grew thanks in part to the COVID-19 pandemic. With continued investment, Chipotle expects them to continue growing. Order totals are usually 10 to 15% higher through digital orders, CEO Brian Niccol said.

Some of these digital sales are through Chipotlanes, the fast-casual chain's drive-thrus that Chipotle is adding to new restaurants. Of the 41 new Chipotles that opened in 2021, 36 of them have Chipotlanes. There are 284 US Chipotlanes as of September 30, and Chief Financial Officer Jack Hartung said so far there are "encouraging results." Chipotlanes also offer higher margins than a traditional Chipotle make-line and dining room, Hartung said in the earnings call, because they typically have higher sales and operate more efficiently than the traditional format.

Chipotlanes have been in the works for a few years. By early 2019, Chipotle had 10 US Chipotlanes, and executives told Insider that they planned to open dozens more, while also investing in digital ordering. Chipotle's digital sales exploded during the COVID-19 pandemic, making up more than half of sales in 2020. Now, the brand is investing in building more online-order only "Chipotlanes" and opening new locations. CEO Brian Niccol said in an earnings call last year that Chipotle plans to more than double its locations.

Chipotlanes are attractive to the business for improved margins, but they're also attractive to customers for their convenience. Hartung cited internal data that the time from ordering to food being ready in Chipotlanes is about ten minutes, down from 12 minutes last year. This decrease in wait time is especially impressive as fast food is getting slower across the board.

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