Chipotle reveals new dessert

Buñuelos are one part of the company’s bid to boost business

Chipotle Mexican Grill Inc. has finally revealed one of the desserts it has been developing in recent months in a bid to reinvigorate sales: Buñuelos.

Speaking during the company’s earnings call on Tuesday, CEO Steve Ells said Chipotle is working on two desserts and plans to start testing them later this month.

One of the desserts is Buñuelos, a traditional Mexican sweet of fried tortilla strips with honey, cinnamon and sugar, served with an apple caramel butter dipping sauce.

“Buñuelos are simple to make using our existing equipment and require us to add just a few additional ingredients,” Ells said. “They’re delicious and complement our menu nicely.” 

Details of the desserts and the tests were not available. Still, Chipotle hopes the new products will help it continue to recover from a steep decline in 2016.

Same-store sales increased 17.8 percent in the first quarter, which helped revenue increase 28.1 percent, to $1.07 billion. Executives cited a “combination of factors” for the improvement.

One factor was what Ells called “a relentless focus on the guest experience.”

“We eliminated dozens of needlessly complex measures and tasks, freeing up more time for training, hiring, marketing and customer service,” Ells said.

The company restructured its bonus program for managers and field leaders to focus on five “easily understood” metrics, he said. 

“We’re already seeing this translate into decreased turnover, better customer service scores, better digital sales support, labor efficiencies and improvements in other key performance metrics,” Ells said. 

Digital orders increased 53.5 percent in the quarter, Chipotle said, due in part to the use of smarter pickup times technology that assigns pickup times based on transaction volume.

Chipotle has also removed additives from its tortillas, Ells said, which makes it the only national restaurant brand to use no added colors, flavors or preservatives. 

And he took a shot at a restaurant industry that has been focused on removing unwanted ingredients from its menus — in part a reaction to Chipotle’s popularity.

“While many other fast-food brands have been busy upgrading their menus by replacing artificial ingredients with friendlier-sounding industrial additives that serve the same purpose, we’re committed to serving only real ingredients,” Ells said.

“None of the ingredients used in Chipotle’s food have been genetically modified,” he added. “No other national restaurant brand is as fully committed to making better food made from whole, unprocessed ingredients.”

Chipotle is changing its marketing strategy to get customers back. The company advertised in the first quarter, which it typically does not do. And in April, it launched its largest ad campaign, “As Real as it Gets,” which includes national television. 

Chipotle chief marketing and development officer Mark Crumpacker said it’s “much too early to evaluate” the campaign’s success, “but initial results indicate that it’s performing well, especially with consumers familiar with Chipotle.” 

Investors on Tuesday were initially thrilled with Chipotle’s performance — its stock at one point seemed poised to surpass $500 for the first time in well over a year. But enthusiasm dampened with news that Chipotle experienced a payment card breach in late March through early April.

Still, the company’s stock was up nearly 3 percent on Wednesday.

Additionally, Chipotle is carefully raising menu prices. The company selected “low risk” markets to test a 5-percent price increase, it said, the first increase since 2014.

“We have absorbed substantial labor and food inflation, and our overall costs of doing business have increased dramatically,” CFO Jack Hartung said.

Chipotle increased prices at only 440 locations, and will study consumer response in those markets to consider increases in other locales.

“But we will be very patient, and we will not be in a hurry to expand the increase to other markets,” he said. 

Hartung acknowledged that Chipotle has work to do when it comes to speeding service.

“Throughput is an important focus of ours, and we’re doing OK, but not great,” he said. “It hasn’t been an important focus in the last year and a half, and because we’ve had high turnover, we have to retrain and regain this skill. That’s something we’re active in doing now.”

Contact Jonathan Maze at [email protected]

Follow him on Twitter: @jonathanmaze

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