The coronavirus pandemic has changed the way Americans do just about everything in life, from working to learning to eating. And given the way cases have been spreading, dining in restaurants just isn't an option these days for worried consumers or those with underlying health issues.
Chipotle Mexican Grill (NYSE: CMG) seems to have recognized that, and it's about to open its first digital-only restaurant. Typically, Chipotle locations include an order counter and a dining area where customers can enjoy their meals. The chain's new digital-only location, opening in Highland Falls, New York, will not include a dining room space, nor will it have a traditional line for ordering. Rather, customers will need to place their orders in advance using Chipotle's app. They'll also have the option to order meals on the company's website or via third-party delivery platforms.
Chipotle's new design will be able to accommodate large catering orders, which will have their own dedicated entry and lobby for pickup. Otherwise, customers will order in advance, pick up their food, and head along on their merry way (though there will be a small waiting area for customers whose meals aren't ready the moment they get there).
A strategic move for Chipotle
The coronavirus pandemic has produced a surge in online ordering, and that applies not just to food but to everything from clothing to books to household supplies. It's this trend that inspired Chipotle to invest in its new digital-only design. In 2020's third quarter, digital sales for Chipotle more than tripled, and the company's CEO said total digital orders could surpass $2.5 billion this year, which is more than twice last year's total.
Chipotle's digital-only design also takes up a lot less square footage, and that could result in major savings for the company. With real estate coming at a premium in cities in particular, removing dining areas lets Chipotle pump out orders without having to take on higher rent costs for the purpose of giving customers a place to sit.
A growing trend
Chipotle isn't the only fast-casual restaurant to change its layout. Earlier in the year, Burger King announced a new touchless restaurant design that promotes public safety through contactless ordering. And if Chipotle's model proves successful, similar chains may seek to follow suit.
On the one hand, it's easy to argue that this shift is bad for real estate investors. Smaller, more efficient spaces mean less demand for square footage, which could put shopping center operators in a tough spot. On the other hand, by strengthening its brand and cutting its costs, Chipotle is helping to preserve its long-term viability. And at a time when the restaurant industry has truly been hammered, securing itself financially is not only good for Chipotle but for the commercial landlords who rely on the chain to keep up with rent and continue opening and operating locations. And if more restaurants adopt this model, it could be just the thing that sustains them throughout the ongoing crisis and spurs additional growth once the pandemic is behind us.