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Chipotle customers are finally balking at higher delivery prices

Chipotle wins on value, food quality, and convenience.Delivery orders are down at Chipotle.

Chipotle

  • In 2021, Chipotle reached $3.4 billion in digital sales.
  • But Chipotle’s e-commerce business is slowing down from peak pandemic levels, the chain said Tuesday.  
  • Delivery orders for the latest quarter decreased by 15% amid delivery prices hikes made last year. 

Profits are soaring at Chipotle as the chain is experiencing a surge in dining room visits. 

But it’s coming at the expense of the company’s digital business. 

Digital sales in 2022 accounted for 39.4% of sales, down from 45.6% in 2021 and 46.2% in 2020, the company reported Tuesday during its fourth-quarter earnings call. 

Jack Hartung, chief financial officer at Chipotle, said the digital business is declining for two reasons – consumers are returning to restaurants in droves, and delivery orders for the quarter declined by 15%.

“I think there’s probably some people deciding that while that channel has a lot of convenience, there’s a higher price that comes with that,” Hartung said about the higher cost of delivery.

Chains like Chipotle often mark up menu prices for delivery orders to offset fees paid to third-party delivery operators like DoorDash. In the third quarter of 2022, delivery prices at Chipotle increased 13% compared to the same period in 2021, the company previously told Insider.

CEO Brian Niccol said consumers are comparison-shopping when ordering from the Chipotle app. They “toggle” between pick up and delivery and “choose order ahead” because it’s less expensive, he noted. 

Insider looked at the Chipotle app to review the difference in prices in Orange, California. A chicken bowl costs $9.10 for pickup. The same meal costs $11.50 for delivery plus a $1 delivery fee and $3.37 in taxes and service fees. With a suggested $3 tip, the final price to deliver the chicken bowl was $18.87.  

Niccol said consumers might jump to another chain if they find free delivery. Chipotle’s playbook does not include discounting its menu, he said. 

“We’re not interested in renting or borrowing customers,” said Niccol, who came to Chipotle from Taco Bell in early 2018. “We want people to be a part of the business because the value proposition is right for them.”

Chipotle reported 2022 net income of $899.1 million, up from $653 million in 2021. Revenue increased by 14.4% to $8.6 billion in 2022. The company opened 236 new restaurants last year, bringing its total restaurant count to 3,187. Most new restaurants included Chipotlanes, the chain’s drive-thru lane dedicated to mobile orders. 

Are you a fast food insider with insight to share? Got a tip? Contact this reporter via email at nluna@insider.com.

 

Read the original article on Business Insider
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