Chipotle CEO says breakfast off the table for now

Chipotle CEO says breakfast off the table for now
Copyright 2019 CNN
Chipotle CEO Brian Niccol explains why Chipotle isn't getting into breakfast or fake meat.

Chipotle wants to keep growing. Just not in the morning.

“We’re not going to be doing breakfast anytime soon,” CEO Brian Niccol told CNN’s Chief Business Correspondent Christine Romans at a private event in Los Angeles.

Fast-food and fast-casual restaurants are adding new breakfast items to their menus because the morning meal is a rare growth area for the sector. Panera has improved its offerings with better coffee and wraps, McDonald’s has tested out indulgent donut sticks, and Dunkin’ has been tackling the space from all angles, with new breakfast bowls and a sandwich featuring Beyond Meat’s meatless sausage. The new items helped Dunkin’ increase sales earlier this year.

Chipotle has a clear way into the meal: It already sells breakfast burritos at a single location, in Dulles International Airport outside Washington D.C.– but only because it is required to.

“In order for us to continue to run Chipotle there, part of the deal is we have to serve breakfast,” Niccol said. That location serves an egg and cheese breakfast burrito and one with egg and chorizo. That latter item, Niccol said, is the reason he won’t rule breakfast out completely.

“Our chorizo is fabulous,” he said.”You put chorizo with eggs in a burrito, that’s pretty good. Right? So down the road maybe, but not right now.”

Instead of branching out into breakfast, Chipotle is leaning into what it knows its customers are after: meat burritos for lunch and, increasingly, dinner.

“People right now are dialed in to Chipotle because they love the chicken, the steak, the carnitas, the barbacoa,” said Niccol, noting that the company’s chicken burrito makes up the bulk of its sales.

Chipotle recently added carne asada to its menu as a limited-time offer, the first time that the chain added a new meat item since it reintroduced chorizo in 2018. The carne asada option was tested in three American cities over the past year and performed “incredibly well,” according to Chipotle.

The chain is also making digital improvements to encourage more orders, including outside of lunchtime. It launched a loyalty program, sped up the drive-thru process with “Chipotlanes” for pickup orders and added a second make line for online orders. It’s also started to offer delivery.

Digital orders also are going through the roof. In the second quarter, they grew 99% and accounted for 18% of sales. Niccol thinks that one day, digital orders could make up half of Chipotle’s sales.

Chipotle’s “digital transformation” is about “giving people more access and driving even further into this idea of a frictionless experience,” Niccol said. The company plans to continue leaning into tech, he added, noting that the “Chipotlanes” will likely “be a significant piece of our business.”

Together, the changes have made it easier for groups to order, Niccol explained, which means more dinner orders.

“If you come in with a group of friends, to move down our line, it can be a bit cumbersome,” he explained. When ordering online or through the app, “you can share the payment, you can order ahead, you have everybody’s order, you just show up, you sit down or you can grab and go.”

By focusing on lunch and dinner, Chipotle avoids the costs associated with breaking into breakfast. The meal may be lucrative, but there’s a high barrier to entry for companies that don’t already serve food in the morning. Wendy’s, for example, recently shared that it plans to hire about 20,000 US employees and invest $20 million in serving breakfast nationwide.

It’ll be especially hard to recruit so many employees in such a tight labor market. Chipotle, for its part, is trying to attract workers by encouraging mobility within the company, offering quarterly bonuses and, among other things, teaching unique skills.

“The first week on the job we teach you knife skills on how to actually cut vegetables, how to cut lettuce, how to cut avocados, how to mash guacamole,” Niccol said. “These are all skills that transfer then to other opportunities in the restaurant industry.”

So far, Chipotle’s efforts seem to be working. The company’s stock has nearly doubled so far this year, and its sales and in the second quarter jumped 13% to $1.4 billion. Niccol has been credited with helping turn the business around after E. coli outbreaks in 2015 and 2016 drove customers away.

Today, Chipotle has roughly 2,500 restaurants. At the end of 2014, there were about 1,800 Chipotle locations. Niccol thinks that figure could grow to about 6,000, he told Romans, without specifying a timeline. “We’re just getting started.”