Chipotle surpassed $3 million average unit volumes in 2023, putting it on par with McDonald’s, which has AUVs of over $3.3 million. The fast casual chain is now ready for its next milestone: $4 million AUVs. 

“Things like automation like Hyphen and Autocado and continuing to do things with our rewards program, the menu innovation, the marketing will obviously be things that push us further and further,” CEO Brian Niccol told investors Tuesday during an earnings call.

Even with these strategies in place, operational and workforce improvements had the biggest impacts on the company’s AUVs. 

Stores reported better throughput and higher staffing levels that led to improved speed of service, Niccol said. General manager turnover was at its lowest levels since Niccol joined Chipotle as CEO in 2018. Strong leadership helps with overall restaurant operations, he said. 

Staff turnover is at or better than pre-pandemic levels, analyst William Blair said in a report emailed to Restaurant Dive. Hourly and salaried staff turnover rates began to dramatically improve in December 2022 after it deployed “Project Square One,” which helped improve operational standards with more hands-on training. In late January, Chipotle added perks like financial tools and planning and mental health benefits as it looks to hire 19,000 people for peak sales season between March and May. 

Last year, the company adjusted the pace of orders on digital makelines to allow for a better balance between its front and back line, he said. The chain collected data on its throughput and began offering feedback and coaching on a weekly basis, which helped build morale, Niccol said. 

“Since we put these coaching tools in place in the third quarter, we have seen the number of restaurants with at least four crew members on the front line during peak periods improve from 30% to 50%,” he said. This helped boost throughput during 15-minute peak periods by an entire percentage point in Q4 2023. 

These improvements could lead to even higher volumes during the spring and summer months, per William Blair. 

“So the good news is we still have a lot of headroom to go on operational execution, and I think we've got the right things in place for the long term to get us to that $4 million and beyond,” Niccol said.

As more restaurants become fully staffed, analyst firm BTIG said it expects more improvements to speed of service. Long-term, there is a lot of potential to boost throughout with automation, BTIG said. Chipotle expects to pilot an automated makeline through its partnership with Hyphen in a restaurant later this year. It began testing the technology in the Chipotle Cultivate Center last year. 

“While this automation is still many years away from deployment, we believe this technology has the potential to drive meaningful improvements in labor efficiency, and could lead restaurant margins north of 30% at some point in the future,” BTIG said. 

Chipotle builds upon momentum from 2023

In addition to surpassing $3 million AUVs, Chipotle posted same-store sales growth of 8.4% during the quarter and 7.9% for the year, according to its earnings release. 

“This was one of the most impressive quarters that Chipotle has posted in several years, in our view,” BTIG said in a report emailed to Restaurant Dive. “We were most impressed by the 7.4% increase in traffic. Traffic trends accelerated 330 [basis points] sequentially, far outpacing the modest improvement seen by the border industry in the fourth quarter.” 

In addition to improved operations, the chain saw success with menu innovation. Chipotle’s LTOs of chicken al pastor and carne asada surpassed management’s expectations and drove incremental transactions, Niccol said. The chain will roll out two more LTOs and more creative ways to highlight its core menu. Earlier this year, it announced a partnership with Strava, a digital community of over 120 million athletes, to reward healthy habits while also highlighting how Chipotle’s ingredients appeal to all diets and lifestyles. 

Digital enhancements to its app, including order readiness messaging, wrong location detection and reminders to scan for rewards points at check out, all helped improve the guest experience, Niccol said. Chipotle added suggestive upselling on its app based on data it has on rewards members, including order history.

“Going forward, I believe we are on a multi-year path to commercializing our customer data and insights into more targeted marketing campaigns and improving the overall digital experience that will drive increased frequency and spend over time,” Niccol said. 

All this momentum could help boost sales across the company’s system. 

“We have a history of having outsized comps when the economy is going well, when our operations are going well,” Chipotle CFO Jack Hartung said during the Tuesday call. “In the fourth quarter … we had a great combination of demand being created by Carne Asada, what’s become a favorite of our customers, and throughput allowing those sales to flow through.”

Chipotle’s margins will only improve over time as the chain pushes toward that $4 million AUV mark, and could reach the high 20% or even the 30% range, he said. The chain’s margins are currently 26%. 

“A plausible scenario now exists for Chipotle to nearly triple its annual revenue and more than triple its operating profit to $28 billion and over $5.5 billion, respectively, over the next decade as the company reaches 7,000 locations,” analyst William Blair said.