Dive Brief:

• Chipotle’s comparable transactions grew 8.7% last quarter, accounting for the bulk of the company’s surging 11.1% same-store sales growth, according to Chipotle’s Q2 2024 earnings release. 
• The company’s Chicken al Pastor limited-time offer, and general seasonal trends, contributed to transaction growth across all income cohorts, CEO Brian Niccol said on the company’s Q2 earnings call on Wednesday. 
• Chipotle’s traffic gains moderated somewhat in June, down to 3% to 3.5% year-over-year growth, with July following the same trend, but exacerbated in part by the impact of Hurricane Beryl in Texas and a tech outage — possibly the CrowdStrike bug that paralyzed some sectors earlier this month — CFO Jack Hartung alluded to on the earnings call.

Dive Insight:

Niccol said the spring traffic surge demonstrated the importance of the chain’s focus on throughput in its labor deployment strategy. The roughly 50% of Chipotle restaurants that have an expeditor — a worker deployed between the point-of-sales system and the salsa station who helps with packaging and payment — managed to sell an average of five incremental entrees during the store’s peak 15-minute sales periods.

Niccol said the chain was still looking to expand deployment of the expeditors and that its present level was insufficient, but encouraging.

“We've made progress to get to 50%,” Niccol said. “In the past, we've been able to get to that number closer to 70%-plus.”

Labor costs as a percentage of revenue actually fell by 20 basis points in Q2, Hartung said, despite an estimated 6% wage inflation and the expanded use of expeditors. Half the company’s wage growth was due to the increase of QSR minimum wages in California. 

Chipotle’s transaction comparables

The brand’s use of LTOs to drive traffic can come with downsides. Chipotle will bring its brisket LTO back for a period in the fall, Niccol said. Chicken historically costs less per pound than beef, and a shift from chicken al pastor to brisket brings increased per order protein costs. Protein costs would contributed to a growth in cost of sales from 29.4% in Q2 to about 31% in Q3. The other contributors are increased dairy and avocado prices and investment in restaurants that have outlier portion scores on customer surveys, following a social media obsession with documenting the brand’s portion sizes.

Consumer efforts to document Chipotle’s portion size — often by filming workers as they assemble orders — aligns with a broader reaction against pricing and inflation throughout the restaurant industry. McDonald’s has also seen heightened consumer attention on social media — in this case, to its year-over-year price growth — prompting public insistence from the brand’s executives that some of the pricing claims were false. Overall, chains are leaning into value in 2024 after traffic declines, as a way to win back customer favor.