Posted: Oct 26, 2017
Chipotle's shares plummeted after a disappointing quarter.
UBS laid out a game plan that the chain needs to execute.
Initiatives include growing delivery, improving guest experience, and adding new menu items — which could include breakfast.
Chipotle's shares fell nearly 12% — nearing a five-year low — after missing expectations on Tuesday.
The company's revenue reached $1.13 billion in the quarter, falling short of the $1.14 billion estimate. Now, the fast-casual chain needs to make some major changes if it wants to survive.
In a note that called Chipotle's ongoing sales trends "sluggish," UBS analyst Dennis Geiger laid out exactly how the fast-casual chain hopes to survive.
Here are three key things that Chipotle needs to execute if it wants to turn business around:
1. Adding new menu items
"Unlike nearly every other fast-food company, Chipotle rarely adds new items," CEO Steve Ells said Tuesday.
However, he said that this was changing. With the new test kitchen in Manhattan, Chipotle has been semi-publicly testing items including frozen margaritas, new salad dressings, and — prior to its national launch — queso.
Ells and other executives hinted that queso may just be the beginning of new menu innovation, even mentioning new "day parts" — which likely means a breakfast menu test is on the horizon.
UBS supports the new approach to menu innovation, with Geiger writing that it is a "shift in philosophy that we're in favor of to avoid menu fatigue, but execution is critical."
2. Improving customer experience
Improving guest experience has been one of Chipotle's major focuses as the company attempts a turnaround.
Last December, Ells said he'd give roughly half of Chipotle's roughly 2,100 locations a C grade for service because of flaws like messy soda stations, dirty tables, and slow-moving lines. In January, Chipotle announced it was retooling its training program.
3. Investing in digital and catering
Digital, delivery, and catering all provide a new chance for Chipotle to boost sales.
Chipotle delivery sales increased 33% in the last quarter, and catering grew 14%. Digital orders also exploded, growing 51% since the chain implemented "Smarter Pickup Times" earlier this year.
By Kate Taylor
October 25, 2017
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