What we can learn from Chipotle's Q3 Earnings call

The TL;DR, most of which the industry already knows, but is still good to beconfirmed via public earnings:

• Digital ordering is king. It's comprised 49% of their sales for the quarter and

is up 202.5%. Two quarters into COVID, allowing customers to order via app and

web is core to the Chipotle customer experience.

• The new "Chipotlanes" are helping streamline operations and

efficiency for in-store pickup and order ahead. Having a store layout with

better customer access and convenience to digital order ahead transactions both

improves their guest experience and helps drive sales.

• In fact, locations with a Chipotlane have 10% higher sales than non-Chipotlane restaurants. Order ahead to delivery ratio is significantly higher towards order ahead at these restaurants, which also adds meaningful margin to those locations. 

• Delivery via 3rd party marketplaces is eating away at margins and reducing

profitability. The extent of these commission expenses and largely responsible

for the stock falling 5%+ in after hour trading.

• The business model Chipotle has around its own delivery channel doesn't work.

If digital sales are roughly 50%, and delivery comprises roughly half of that

(per their investor call), then the brand has approx. $395M in delivery sales, while

collecting only $20M in delivery fees from customers, or about 5%. Not nearly enough

to cover expenses.

• As a result, the chain is testing delivery menu price increases to try and offset these expenses. Chipotle is testing 7%, 13%, and 17% menu price increases for delivery across a variety of markets int he U.S. To note, customers ordering via their direct channel will have their delivery fee lowered from $3 to $1, effectively offsetting the majority of those increases, while 3rd party platforms will continue to have the same delivery fee structure for users.