Burritos on Demand
I’m often willing to spend more money on the same food I could have gotten for a fraction of the price, all for the ease of ordering from my phone. And I’m not alone.
The rise of digital technology is transforming the food delivery market, leaving full-service food chains like Chipotle wrestling to adapt to new customer habits and expectations. Experts forecast a massive 79 percent surge in the total U.S. food home delivery market over the next five years . While the market represents only $30 billion this year, Morgan Stanley estimates it could balloon to $220 billion within a few years .
Digital on-demand food delivery services like GrubHub, Postmates and UberEATS have changed the game. As customers sign up to one these platforms, 80 percent never or rarely leave for another platform . As the use of these digital on-demand delivery platforms continues to grow, Chipotle will need to find ways to retain its direct touchpoints with its customers and make its service faster and more streamlined.
To further complicate matters for Chipotle, UberEats, DoorDash and Grubhub have invested in “virtual restaurants” to fill voids in local food optionality (i.e. when people search these on-demand delivery apps for a specific food item but there’s no restaurant nearby that offers it) .
Virtual restaurants exist to serve food only via delivery. Unlike Chipotle, they can adopt a quick, low cost “launch, experiment and iterate” approach to its menu—swapping out its underperforming meal items on GrubHub, Postmates or UberEats’ AI-powered food recommendation lists with higher-performing options . Also in contrast to Chipotle, these “restaurants” run in a smaller footprint in lower-rent districts, with no need to account for foot traffic, parking space, budget for décor, seating areas and customer-facing staff .
In response to 30 percent month-over-month growth in delivery orders since Postmates started delivering Chipotle, Chipotle executives signed an official deal with the San Francisco-based delivery start-up . Postmates still serves as the featured delivery option on the chain’s website, along with the option to order via Tapingo or Favor, two other on-demand delivery platforms. Customers can also place a pick-up order directly on the Chipotle site, or via the Chipotle app .
To manage demand from tablets and online orders, Chipotle’s restaurants have started adding what the company calls a second “make-line,” or team of workers that prepares virtual orders from a prep table in the kitchen. The second line is located in the kitchen to avoid bogging down the main, customer-facing preparation line .
Longer term, Chipotle is planning to experiment with new ordering systems, such as tablets and “virtual drive-thrus” that will enable customers to skip long lines and potentially avoid coming inside the restaurants altogether . Its CEO has not yet explained the virtual drive-thru concept, but other restaurants have used that term to describe curb-side pickup services that allow customers to pick up orders without leaving their cars .
Concerns and Recommendations
As Chipotle re-positions itself to better serve a new on-demand generation, the company sacrifices its customer experience by extending delivery services to third-party on-demand platforms. For example, after placing a Chipotle order on the Postmates website or app, the order does not immediately go to Chipotle’s kitchen. Instead, the Postmates order goes directly to a Postmates courier, who then goes to Chipotle, stands in the same line as normal customers, and verbally relays the details of your order to the Chipotle assembly line .
Chipotle should be receiving orders from all third-party delivery services well in advance, so that the order pick-up process is fast and foolproof as possible. As the number of online orders continues to rise, Chipotle should separate its front-of-house space for different order types, so delivery drivers and couriers, often toting large bags, do not wait in the same line as normal customers.
Chipotle should also start lessening its reliance on third-party delivery services for boosting sales, and instead invest in expanding its own in-house delivery capabilities. In taking note of this sudden wave of virtual restaurants, Chipotle should consider setting up its own “ghost kitchens” to better accommodate delivery. Unburdened with high rent costs or any of the other necessities that go hand in hand with its full service locations, these ghost kitchens could operate hidden from customer view, and exist solely to support the fulfillment of faster, fresher deliveries.
As the on-demand food delivery space grows, I wonder if Chipotle “ghost kitchens” (i.e. its own versions of virtual restaurants) could eventually account for more sales than its traditional, full-service locations. For a quick-service restaurant like Chipotle, how much does the dine-in or order-in experience matter, and how much of a threat does on-demand delivery pose?
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