How will the change in Chipotle’s sales mix due to the pandemic impact Chipotle’s profits?

picture of a chicken burrito bowl
Chicken burrito bowl

Digital sales for Chipotle Mexican Grill Inc. (NYSE: CMG) grew 216.3% in the second quarter of 2020, accounting for 60.7% of sales for the quarter, as the effect of the pandemic for the entire quarter sent customers to online options rather than dining in. Many digital customers opted for delivery, viewing it as a safer option than alternatives.

Chipotle reports that expenses are higher for delivered orders than for dine-in orders or to-go orders (digital orders that are picked up from the restaurant by the customer.) Chipotle switched to a $1 delivery fee in June 2020 and is evaluating whether it should charge higher menu prices for delivered food.

Even pre-pandemic, Chipotle was developing its digital resources and to-go capabilities. In the second quarter of 2020, Chipotle built 21 restaurants with “Chipotlanes” (drive-through lanes for digital orders). Sales at locations with Chipotlanes are averaging higher than at those Chipotle restaurants without the drive-through lanes.

Discussion questions

  1. Define “sales mix.”
  2. Given the shift to digital sales, what would be the expected impact on Chipotle’s profit margin? Explain.
  3. Besides a shift to digital sales, what other factors could have an impact on Chipotle’s restaurant profit margin during 2020?
  4. How would you expect that Chipotlanes will affect Chipotle’s financial statements in 2020?

About Dr. Wendy Tietz, CPA, CMA, CSCA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Education.

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