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Chipotle Invests In Self-Driving Delivery Cars as It Expands

Restaurant Chain Plans 200 More Brick-and-Mortar Stores With Focus on Canada

Photo Courtesy of dennizn.

Chipotle Mexican Grill’s plans for recovering from the pandemic's economic fallout this year include opening another 200 locations worldwide and exploring self-driving delivery cars as it adapts to consumer shifts in demand.

The restaurant operator, based in Newport Beach, California, said it has made Canada a top priority for expansion as it seeks to grow its store count in 2021 by about a quarter more than it did last year. Beyond just new locations, the company said it also is ramping up its efforts to meet customers where they are with an investment in robotics tech provider Nuro, which also teamed with Domino’s to deliver pizzas in Houston using self-driving vehicles.

Chipotle’s stake in the Silicon Valley company marks its first significant investment in a third-party technology provider since CEO Brian Niccol took the helm in 2018, and it comes after Chipotle saw its digital sales in the first quarter rise 134% from a year ago, accounting for almost $870 million or 50.1% of its total sales.

“Nuro uses robotics in their fleet of on-road, occupantless and autonomous vehicles to deliver everyday consumer goods, and we believe it has the potential to take the delivery experience to the next level,” Niccol told analysts during a quarterly earnings call. Chipotle has not yet announced specific plans to deploy autonomous delivery vehicles.

Well before the pandemic, Chipotle and other restaurant operators were moving away from dining room service to focus on serving customers placing orders online or through mobile apps for pickup and delivery of meals. Among those efforts, Chipotle has been increasing the number of drive-thru pickup lanes at its locations.

Chipotle officials said the company is now exploring “disruptive opportunities” outside of established third-party partnerships with delivery firms such as Grubhub, DoorDash and Uber Eats.

“Nuro could change the traditional delivery model and we believe consumers are going to continue to seek options and additional access points for how and where they enjoy their food," Chipotle Chief Technology Officer Curt Garner said in a statement.

Officials of Mountain View, California-based Nuro, founded in 2016, did not disclose individual investments for its $500 million Series C funding round completed in November. The round was led by funds advised by T. Rowe Price Associates Inc., with participation from new investors also including Fidelity Management and Baillie Gifford and existing venture investors Softbank Vision Fund and Greylock.

Chipotle reported total revenue of $1.7 billion for its first quarter ended March 31, up 23.4% from a year earlier. Net income was $127.1 million, up from $76.4 million in the year-earlier period.

Location Growth

Chipotle last month opened a new restaurant in Surrey, British Columbia, its first new Canadian location in three years, and it has seven more planned in British Columbia and Ontario over the next 12 months. Those would add to the company’s current 23 Canadian locations, primarily in the Vancouver and Toronto regions.

“We'll continue to experiment with different location formats and restaurant designs throughout the country to gauge consumer preferences,” Chief Financial Officer John Hartung told analysts. “Ultimately we believe we can open at least a few hundred restaurants in Canada, especially with their unit economics now approaching those of the U.S.”

Hartung said Chipotle opened 40 new restaurants during the first quarter ended March 31, bringing its total to 2,800 in the United States and four other countries, and keeping it well on pace to meet its goal of 200 openings in 2021. That would top its 161 openings during 2020.

Chipotle plans to process 324 site assessment requests for potential new locations over the next 12 to 18 months, about 43% higher than last year’s 227. Another priority is transforming more of its existing locations to set up its well-received “Chipotlanes,” which let customers pick up preordered food without leaving their cars.

“We still think that we can have hundreds of conversions,” Hartung told analysts, noting the exact number in coming months will depend on the outcome of talks with landlords. He said landlords are generally more open to significant space conversions when leases are closer to the end of their terms, rather than the start.

“Let's say you’ve got a 10-year primary term with options, when you get to year seven or eight, that’s the time you have the conversation with landlords,” Hartung said. “If you try to have the conversation with landlords to try to get permission to modify the space in year two or three, when you’ve got seven years left, the landlord doesn’t really want to have that conversation. So we have those conversations and we have many of them throughout the year.”

Source: 2021 CoStar News.

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