New York (CNN Business)On Tuesday, Chipotle celebrated a milestone: The opening of its 3,000th location.
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Up until recently, Chipotle would have said that this new restaurant would have put the chain right around halfway to its goal. But last week, CEO Brian Niccol announced that the company has increased its ambitions.
“Over the long term, we now believe we can operate at least 7,000 Chipotle restaurants in North America, up from our prior goal of 6,000,” he said during a call with analysts.
As the restaurant industry tries to adjust to a new normal, big chains are making moves. Restaurants that can afford to are “accelerating development,” said BTIG restaurant analyst Peter Saleh. “They all see an opportunity to take share from smaller independents and regional chains,” he said.
Niccol wouldn’t describe Chipotle’s expansion that way. “The Chipotle brand is really strong, and the economics are really strong,” he told CNN Business in a recent interview. “As a result, where we open, we have great success.”
To accommodate its new goal, Chipotle has plans to open new locations in a relatively under-penetrated market: Small towns with roughly 40,000 residents.
It may seem odd for Chipotle (not-so-cheap lunch, to pin its ambitions on small towns. But urban areas are becoming increasingly expensive. “Development and leasing costs are increasing, particularly for urban locations,” the company said in its most recent annual report.), a fast casual brand that has long appealed to busy office workers looking for a quick,
And although small towns are “a new thing for us,” Niccol said, the strategy has so far “been really effective.” And the company has high hopes for the future.
Why Chipotle thinks it will be a hit in small towns
Before it made a big push into less densely populated areas, Chipotle needed to make sure that its restaurants would offer the quick, convenient service its urban and suburban customers expect. The company’s so-called Chipotlanes, drive-thru windows reserved for diners who place orders ahead of time through Chipotle’s mobile app, can help. Chipotle first introduced its Chipotlanes in 2018. The majority of its new locations will have the drive thrus, according to the company.
In more rural areas, where customers may have to drive further to reach a Chipotle, the Chipotlane could help create a seamless pickup experience, Niccol said.
“To give them the convenience of ordering ahead, taking their time and knowing they can just, zip in and zip out … I think it’s another level that gives people confidence to choose our restaurant,” he said.
Chipotlanes offer another advantage over in-store shopping, which doesn’t work very well for large groups.
“I have a family of five and when we’re trying to order as one ticket moving down the line, I find it stressful,” Niccol said. “It’s a lot easier to just do it in the app.”
Making it easy to order for groups also increases the likelihood that more customers will think about Chipotle for dinner rather than a solitary office lunch. With Chipotlanes, there’s an “ease of execution for that dinner occasion,” Niccol said. That could prove an advantage in small towns which are less likely to host offices.
But then again, the office may never be the same, making urban locations even less desirable.
With more companies switching to remote or hybrid models, many workers may not return to the office five days a week. So far, Chipotle has seen sales at its “suburban restaurants continue to stay really strong,” Niccol said. But while some urban locations are back to pre-Covid levels, some are “not fully recovered,” Niccol added. “We’re continuing to watch the trends on how people will work and go to school in the future.”
And although people may end up working from home more often, they won’t necessarily be making lunch every day.
“As long as people have the confidence and the ability to be out and about, they like to go out to lunch,” Niccol said. “Whether they’re at a central office or a home office.”