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Chipotle’s Loyalty Program Is Working — So Far

Chiptopia is actually pretty popular

Chipotle Closes Over 40 Restaurants In Portland Area Over E. Coli Outbreak Photo by Steve Dykes/Getty Images

Things appear to be looking up at Chipotle, which has struggled with revenue, sales, and traffic after a string of E.coli outbreaks rocked the fast-casual chain in 2015. According to the latest earnings report released Thursday, revenue is still down — but it’s up modestly since the last quarter. A big reason for that? Chiptopia, the company’s new rewards program, seems to be luring customers back.

Specifically, revenue decreased 16.6 percent during the second quarter of 2016, while same-store sales (i.e. sales at locations open for more than 13 months) decreased 23.6 percent. Those numbers aren't great, but they're better than the first quarter, when revenue decreased 23.4 percent and same-store sales dropped 29.7 percent.

Below, three takeaways from the company's earnings announcement Thursday:

1. Chiptopia seems to be working

In April, Chipotle executives announced they would work to lure customers back to the fold with a new loyalty program, later named Chiptopia. Though the program is still in its infancy, nearly 30 percent of all transactions are currently "participating in Chiptopia," said CEO Steve Ells on an earnings call with analysts.

"The program has only been around for less than three weeks," said Ells. "We’ve seen a very regular engagement in those participating in the program. We have over 100,000 people added to the program every single day. And we’ve seen 28 percent of those enrolled in Chiptopia have come back a second time. So we’re seeing exactly the results we had hoped."

Though the main aim of the program was to lure once-loyal customers back to the fold, there are additional data mining benefits. Once the promotion wraps at the end of the summer (it runs July through August), the chain should know a lot more about the dining patterns of its consumers.

"We are already starting to see significant insights from that data," said one company executive on the call, who added that Chipotle is examining customer behavior based on credit card data and the use of Chiptopia. "We will be able to do a better job of seeing those customers who were more loyal a year ago, and whether Chipotle is bringing them in up to two, or three, or four times a week."

Ells added that it’s "very, very likely" that some sort of loyalty program — likely a more permanent one — will take Chiptopia’s place once it ends in August. According to executives, the company is now mining the data from Chiptopia "to help influence the evergreen loyalty program we are evaluating for the months to come."

2. People are ordering chorizo

The fast-casual chain is currently in the process of rolling out a new menu item — chorizo — as a way to combat menu fatigue (it's one of the only additions to the menu in the company's 23-year history).

The chicken-pork blend is currently available in a handful of stores and expected to be available in all stores by the end of the year. According to Ells, chorizo accounts for six to seven percent of entrée sales in the restaurants where it is available.

3. The company still has serious work to do

"Our customers have come to expect a lot from us," said Ells, noting that trust had been lost due to food safety issues. Of course, that hasn't been the only problem plaguing the company.

Chief creative and development officer Mark Crumpacker (who was leading the company’s rebuilding efforts) was indicted on cocaine charges earlier this month. Addressing recent headlines regarding Crumpacker, Ells said the company was "surprised" by the allegations but noted that the company placed him on leave. Chipotle has placed three other staffers over the company's marketing efforts in his absence.

Executives also touched on data that found "the majority" of the company's once-loyal customers have returned, but not at the same frequency. The chain is now focused on increasing traffic frequency and brand messaging, through efforts like its recent short film, Love Story. Price hikes wouldn’t come, executives suggested, until more customers come back.

Asked whether the company has seen much pushback regarding the taste of the food Many have said the flavor quality went down as a result of the company’s safety protocols — items like peppers and lettuce, for instance, began to be chopped in a central kitchen and washed before being sent to Chipotle restaurants.

Crews at Chipotle stores now blanch the peppers before chopping and sautéing them. The lettuce is chopped in-store, too. Executives say those measures not only help ensure customer safety, but increase flavor, too.

Complaints regarding the taste of ingredients have gone down as a result, said executives, who added that the company is working to make its food even tastier. Starting this fall, all tortillas served at Chipotle will be free of preservatives — which will both "set industry standards" and increase the flavor.

Executives did not address rumors of Chipotle’s forthcoming burger concept, which is allegedly already in the works in Ohio.

Tracking Chipotle's E. Coli Outbreak [Eater]

All Chipotle coverage [Eater]

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