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CHP-Quesadilla-Phone-PR-nologo_(1).jpg Chipotle
Quesadillas were a hit. They were added to about 10% of transactions.

Chipotle Mexican Grill sets goal of reaching AUVs of $3M and doubling in size to 6,000 units across North America

Also smoked brisket passes test for national roll out as a seasonal item

Chipotle Mexican Grill has brought average unit volumes back to prior highs of $2.5 million, the company said Tuesday. Now CEO Brian Niccol is gunning for AUVs of $3 million, saying the chain has the potential to reach 6,000 units across North America.

Reporting results for the June 30-ended second quarter, Niccol expressed optimism for Chipotle’s future, citing one key indicator: 

The lunch diner is back. 

“That’s an individual that, frankly, we haven’t seen for a while,” said Niccol. The pandemic lockdown kept workers at home with less need to eat out. But now workers appear to be returning to urban cores and even choosing to dine in restaurants.

Niccol said the fast-casual chain’s 2,853 units are all open and most are back to normal operations. 

Even more encouragingly, Chipotle has been able to keep its strong off-premises business. Niccol said digital sales grew 10.5% and now accounts for 48.5% of sales, despite the return of customers to restaurants for dine-in.

For the quarter, which lapped the peak of the COVID-related shutdown, Chipotle reported same-store sales up 31.2%. 

“We remain confident in our key growth strategies, and we believe over the longer term they will allow us to have 6,000 restaurants in North America with AUVs pushing well beyond $3 million,” said Niccol.

Smoked brisket may be coming to more Chipotle locations in a national roll out, he said, but the chain hasn’t nailed down when.

The beef brisket has been validated by the “stage-gate” process used to determine what might qualify for a national rollout. It will be a seasonal item.

“It’s always nice to have it ready to go,” said Niccol. “We’ll look at the marketplace and figure out the best time to do it.”

Chipotle began testing the protein last year in about 64 units along with Cilantro-Lime Cauliflower Rice and quesadillas. 

Quesadillas were rolled out as a digital-only menu item in March. Niccol said they have been particularly successful, and were added to about 10% of transactions during the June 30-ended second quarter. 

“The quesadillas demonstrated we can run innovation off our digital business without impacting our dining rooms,” he said.

A little more than half of digital sales were order-ahead transactions as the company added more drive-thru Chipotlanes for pickup. Niccol said Chipotlane units typically generate sales about 20% higher than non-drive-thru locations.

The Newport Beach, Calif.-based chain raised menu prices in June between 3.5% to 4%, which helped offset increased labor and food costs. Niccol said there has been little pushback from consumers, indicating Chipotle has pricing power, if needed.

During the quarter, Chipotle opened 56 new restaurants — including 45 with a Chipotlane — and one was relocated. Five were closed, bringing the total count to 2,853.

Revenues increased 38.7% to $1.9 billion. Net income was $188 million, or $6.60 per share, an increase from $8.2 million, or 29 cents per share a year ago.

While the COVID-19 Delta variant remains a concern, the company's financial situation remains strong. Chipotle said it has nearly $1.2 billion in cash, investments and restricted cash, and no debt, as well as access to a $500 million untapped credit facility.

For the third quarter, the company forecasted same-store sales increases in the low to mid double digits.

Contact Lisa Jennings at [email protected]

Follow her on Twitter: @livetodineout

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