Chipotle is testing an autonomous kitchen assistant, Chippy, which provides a robotic solution for making chips in restaurants.
credit: Chipotle
long lines at lunchtime Chipotle Mexican Grill Waiting to order can serve as a good metaphor for Chipotle’s approach to investing in innovation: Although you may have to wait a bit for the results, taco and burrito brands promote the technology from around the world. Giving is going to change the way restaurants are run and the way customers think about food.
This is not a completely new sentiment on the part of the company. Chief technology officer Kurt Garner noted that Chipotle, which was inspired by Uber, first went digital with its app in 2016 and then quickly put it in place in each of its restaurants so that employees never had to choose between serving the customers standing in front of them. Had to do who placed the digital order. But investing in global-changing innovation took on new meaning for Chipotle in April, when it launched Cultivate Next, its $50 million venture fund aimed at easing the margin-squeezing pressures of the restaurant sector, fueled by labor shortages and growing food shortages. There were costs and enticing challenges to deal with. To get customers to spend more time eating in your store.
“We’re thinking about how to grow and scale the company through a lot of lenses,” Garner said, noting that the fund aims for Chipotle to grow from just embracing technological change to make it happen. indicates opportunity. “As restaurants continue to grow, our digital business continues to grow and expand and our mission to create a better world and change the way people think about where their food comes from continues.”
Chipotle’s new venture fund could be a beacon for investors as the restaurant sector grapples with significant economic constraints. Analysts will be looking for concrete examples of Garner’s first two points — new technology that promises to streamline and expand Chipotle’s operations — when Chipotle reports its second-quarter results on July 26.
According to Morningstar, Chipotle has posted generally positive growth numbers since 2016 when the chain was dealing with a food safety scare — it hit near double-digit systemic sales growth between 2017 and 2020. But it isn’t safe from today’s broader market decline. While consensus estimates are calling for Chipotle to post second-quarter revenue of $2.24 billion, up about 19% year over year, and quarterly earnings of $9.04 per share, up 21%, its stock was up year-over-year. The year is down more than 20%.
“The difficulty is on the margins,” said Sean Dunlop, equity analyst at Morningstar.
While Chipotle and the restaurant sector have seen some moderation in comparable store sales growth, rising costs of food, labor and utilities combined with a tendency for consumers to move out of their homes is “pinching up Chipotle’s P&L.” ,” Dunlop said, noting that the squeeze would last until 2024. Owner-run chains like Chipotle and Starbucks can also do worse than franchise businesses because “they bear all those costs themselves,” he said.
Another potential hurdle for Chipotle’s stock: union workers, In early June, a Chipotle Mexican Grill shop in Augusta, Maine, filed a petition for a union election, making it one of the chain’s first restaurants to join the recent event push across the U.S. has flown. Apple To starbucks,
A self-driving delivery robot provided the spark
Like every other VC investor, Chipotle wants to get on the ground floor of early-stage firms developing revolutionary technology. Unlike typical VC firms, however, Chipotle isn’t looking for a specific return on investment over a particular time frame.
“Success for us is multifaceted,” Garner said. “This is an opportunity for us to improve our operating business and this improvement may exceed what we would achieve in terms of tighter financial return on capital.”
Venture fund idea came up last year Chipotle invests in NeurosA SoftBank-backed startup that uses self-driving technology in Prius and custom vehicles to deliver groceries and other items.
Domino’s tests the Nuro, an autonomous car for pizza delivery in Houston.
Source: Domino’s
Garner told the Silicon Valley-themed Sand Hill Road podcast, “We found a lot of traction there in terms of culture and the synergy of ideas and innovation, and we wondered if there was an opportunity to expand our influence and become an accelerator of those ideas.” was.” in May. Garner said Chipotle’s executive team found itself standing with all kinds of ideas, but there was no formal funnel to explore opportunities as a supplier or partner.
Record enterprise investment in restaurant technology — including hardware and software for restaurant management, booking, staffing, mobile payments and inventory management — reached more than $4 billion in 2021, and it is on track to beat it this year. Hundreds of companies have expressed interest in Chipotle’s first round, which targets seed funds to B startups.
Garner said Chipotle will announce its first choice in the next few weeks. Industry watchers say Chipotle’s money is expected to follow industry pain points.
Eric Simon, vice president of the Enterprise Process Innovation Center at Panasonic Systems Solutions Co., said, “After the pandemic many people are investing in modernizing and improving customer experiences and working to reduce labor costs. ” North America.
Simon is seeing demand for solutions like Panasonic’s temperature-controlled smart food lockers that deter theft and mix-ups, which tie off employees who have to remake orders. He is also seeing demand for artificial intelligence apps to help restaurant managers forecast busy times of the day so they can better position their stores.
To that end, Chipotle has already invested in an AI-powered labor management tool that analyzes dozens of variables, such as the weather and available promotions, to determine more skilled restaurant workers. It is also launching AI-based training programs to help restaurant employees climb the management ladder.
The Labor of an Automated Tortilla Chip Maker
When it comes to the type of innovation Chipotle is promoting, Garner points to Chippy, a robotic tortilla chip maker that saves time and labor costs by handling repetitive kitchen tasks.
“It started with, ‘How do we take away some of the dullness of a worker standing at the fryer and roasting chip basket after chip basket? Garner said, noting that the Chippy will be piloted at a Chipotle location later this year. Certified as food safe. “It allows our crew to spend more time serving guests, doing culinary tests.”
Chippy may help Chipotle tackle the industry’s labor shortage, but the company is ultimately changing the world’s food systems with its venture funds.
“When you think about the environmental opportunities in how food is sourced and how it’s served, those are huge areas for technology to be quick and efficient,” Garner said, especially from Europe. Pointing towards eco-centric farming techniques, he said. “Guests want to understand the origins of their food and feel good about what they are buying.”
Sanjeev Krishnan, Chief Investment Officer, S2G Ventures, a 9-year-old venture, said buying into sustainable agriculture practices will give quick service restaurant brands better affordability of ingredients, a guaranteed supply and an opportunity to offer customers something unique versus competitors. Fund dedicated to supporting sustainable and healthy food systems.
“More interesting is that these quick-service restaurants could usher in an era of biodiversity in our food system – ours is boring,” Krishnan said. “Just 15 crop plants provide 90% of the world’s food energy intake, of which three – rice, corn and wheat – make up two-thirds of it,” he said.
Investment in non-meat protein products has increased over the years, with Chipotle, McDonald’s, Burger King and Dunkin’ recently testing burger and sausage options on their menus. Many brands are expanding plant-based experimentation to other product categories, and Pitchbook data tracks venture funding into a new category: 3D bioprinting, which involves printing living cells, growth factors and other biomaterials, Which produces whole cut meat as per the firm’s Q1. Foodtech Report. 3D food-printer companies logged $185.7 million in VC funding last year, it said.
When it comes to investing in high-risk emerging technology, it may be helpful to think of Chipotle’s role in line with other companies’ R&D costs, according to Dunlop.
“Nothing is off the table,” Garner said. “one of the things [CEO Brian Niccol] It has brought the idea into our culture that we are very proud of what we do and have very little ego. We can be proud of what we’ve made — like plant-based chorizo — but if anyone has any great ideas, we’d love to hear from them.”