Chipotle leans into burritos to go with first digital-only restaurant

As more people turn to takeout and delivery to avoid public places during the coronavirus outbreak, cash-strapped restaurateurs have been forced to chase down dollars in novel ways, including testing new concepts or paring down operational costs with ghost kitchens. Such facilities can be urban warehouses containing multiple small kitchens leased by a restaurant or a restaurant subcontractor for delivery only, eliminating the need for premium locations and fancy build-outs. Orders are often delivered by “third-party aggregators” such as DoorDash, Uber Eats or Grubhub.

McDonald’s opened a ghost kitchen restaurant last year in London, and Chick-fil-A and Qdoba, one of Chipotle’s competitors, have also been experimenting with the model, which allows for higher profits and lower labor costs.

“The Digital Kitchen incorporates innovative features that will complement our rapidly growing digital business, while delivering a convenient and frictionless experience for our guests,” Curt Garner, Chipotle’s chief technology officer, said in a statement. “With digital sales tripling year over year last quarter, consumers are demanding more digital access than ever before.”

Chipotle’s new approach transforms the sizzles and scents and steeliness of the Chipotle dining room into a “a lobby designed to include all of the sounds, smells and kitchen views of a traditional Chipotle restaurant,” the company said. There will be a dedicated entry and pickup space for large catering orders. Guests will have to order in advance through the Chipotle website, the Chipotle app or third-party delivery partners.

Deliveries were already on the rise before the pandemic, but in the age of shutdowns and social distancing, it has become a rare pathway to growth in an otherwise meager landscape. A study by the NPD Group found that delivery orders climbed 67 percent in March, even as restaurant traffic slumped 22 percent. There are about 1,500 ghost kitchens in the United States, Restaurant Dive reported, but that number is expected to soar. One report from Euromonitor predicted that the ghost kitchen market could be worth $1 trillion by 2030. Food-delivery revenue overall is projected to hit $24 billion by 2023, according to Statista.

The battered restaurant industry is operating amid a growing possibility of new shutdowns as the United States continues to shatter records for new coronavirus infections. On Wednesday, New York put in place a 10 p.m. curfew for restaurants and bars and banned gatherings of more than 10 people in private residences. In Maryland, restaurants have been ordered to reduce indoor dining capacity from 75 percent to 50 percent after Gov. Larry Hogan (R) said health metrics showed the state had “crossed over into the danger zone.”

A September survey by the National Restaurant Association found that, six months after the first-wave shutdown, about 100,000 U.S. restaurants had closed long-term or permanently. The industry is on track to lose $240 billion in sales by the end of 2020, and 3 million workers have lost their jobs.

Independent business have been hit especially hard: Technomic, a consulting firm for the restaurant industry, estimates that 20 to 25 percent of independently owned restaurants will never reopen.

Chipotle has felt the delivery boom in recent months, with digital sales rising more than 200 percent year over year last quarter to more than $776 million, which was nearly half of all the company’s sales in the third quarter. On an earnings call last month, chief executive Brian Niccol predicted that if digital sales hold steady, they could exceed $2.5 billion this year.

Chipotle has more than 2,700 locations in the United States, Canada, the United Kingdom, France and Germany, and employs more than 94,000. Its stock closed up nearly 5 percent on Wednesday.