Dive Brief:

• Chipotle will open its first Chipotlane Digital Kitchen restaurant in Cuyahoga Falls, Ohio, later this month, according to a press release.
• The restaurant, which is smaller than a traditional Chipotle, has no dining room or a front line for guests. The kitchen has a make line dedicated to digital orders placed through the chain’s app or website. Guests and delivery drivers can collect orders through the Chipotlane or walk-up lane. Patio seating will be available for customers. 
• The opening of this restaurant is part of Chipotle's ongoing development plan to open more restaurants with Chipotlanes and increase digital sales, which comprised 43% of the company’s sales mix during Q3 2021.

Dive Insight:

The opening of this digital-only restaurant is the first in the company's new strategy to open smaller units in between two high-volume restaurants, Jack Hartung, Chipotle CFO, said during the company's Q3 2021 earnings call. Having smaller footprints reduces rent and investment costs, he said. These restaurants can also increase access to customers who might be too far away from the larger restaurants.

Chipotle's expansion of Chiptolanes and its growing digital channel has been one of the drivers of the company's ongoing positive same-store sales, which were up 15.1% during Q3. Chipotle's year-to-date digital sales are also at nearly $2.7 billion, just shy of the $2.8 billion in 2020, Chipotle CEO Brian Niccol said during its Q3 earnings call. 

"Digital is proving to be sticky as it's a frictionless and convenient experience that has been aided by continuous technology investments to improve operational execution, innovation and the customer value proposition," Niccol said. "As a result of the pandemic, many new consumers were introduced to Chipotle via digital channels, and are now using us for alternative occasions."

Chipotlanes also prove to be more profitable for the chain. New restaurants with a Chipotlane have about 15% higher sales than restaurants without a pickup lane, according to the press release. The company, which has a total of nearly 3,000 units, has about 300 Chipotlanes with plans to add more as it pushes for 6,000 total restaurants in North America. 

As of late October, the company expects to end the year with 200 new restaurants with over 75% including a Chipotlane, Niccol said.

While digital allows the company to experiment with new menu items and access more people looking for off-premise services, it doesn't want to create so much complexity that it slows down the digital channel, Niccol said. The company wants to continue to be able to allow complete customization of orders at a fast speed for customers. Chipotle will continue to monitor the throughput of digital, he said.

The chain is testing other digital formats, including its first digital-only restaurant, which opened outside of West Point in Highland Falls, New York, in 2020 that offers pickup and delivery only, but it doesn't offer a Chipotlane. It also has been experimenting with pickup windows and carside pickup.