Chipotle Mexican Grill is looking to capitalize on rebounding restaurant traffic by pushing for new locations in places such as Alberta, Canada, while adding to its slate of “small town” U.S. sites with lower land and other development costs than in bigger cities.
During an earnings call with analysts Tuesday, Chipotle executives said the Newport Beach, California-based operator of approximately 3.100 restaurants is on track to meet its previously stated goal of opening between 235 and 250 restaurants during 2022. The company is projecting another 255 to 285 openings in 2023, with executives reiterating plans to return to pre-pandemic store growth rates of 8% to 10% annually.
The growth plans come despite lingering pandemic-related construction issues. Chief Financial Officer John Hartung said development times to plan, build and open a new restaurant have increased from around 14 to 15 months before the pandemic to as much as 21 to 22 months in the current climate.
“The biggest challenge we’ve had is frankly supplies,” Hartung said, noting difficulties in obtaining components such as walk-in coolers and ventilation systems.
In its ongoing quest to reach 7,000 locations, CEO Brian Niccol said the company is looking to expand significantly in Canada’s Alberta province, with several locations recently opened or in development in Calgary and Edmonton. In the U.S., it is looking to expand its “small town” pipeline with an emphasis on cities with populations of between 40,000 and 100,000.
During 2022, for instance, Chipotle has opened or announced plans for restaurants in Texas cities such as San Angelo and Hutto. Niccol told analysts that smaller-market stores generate smaller sales volumes than their big city counterparts, “but the cost structure is more favorable in these small towns,” which helps make them profitable.
Retail traffic analytics firm Placer.ai reported this month that McDonald’s and Chipotle are among the fastest rebounders for customer visits compared with a year ago, as inflation-strapped consumers plan their dining based on factors such as convenience and pricing relative to the cost of full-service dining and meals prepared at home.
Those two brands have “weathered the pandemic storm impressively,” with Chipotle’s September visits rising 5.5% from a year earlier, compared with a drop of 2.7% in foot traffic for the overall fast-casual restaurant category, the report said. Chipotle is also being helped by increases in morning traffic, though most locations don’t sell breakfast items.
For its third quarter ended Sept. 30, Chipotle reported revenue rose 13.7% from the year earlier to $2.2 billion, with net income rising 11.6% to $257.1 million.