Chipotle seeks $50 million for the future of fast food
Chipotle is testing an automated kitchen assistant, Chippy, that provides a robotic solution for making french fries in a restaurant.
Long lines about lunchtime at Chipotle Mexican Barbecue Waiting to order can be a good metaphor for Chipotle’s approach to investing in innovation: while you may have to wait a bit for results, the taco and burrito brands are pushing. Technology from around the world will change the way restaurants do business and customers think about food.
It’s not exactly a new sentiment from the company. Chief technology officer Curt Garner noted that Chipotle, inspired by Uber, first went digital in 2016 with its app and then quickly built spaces at each of its restaurants to accommodate employees. Employees never have to choose between serving customers standing in front of them versus those who have ordered digitally. But investing in globally changing innovation gave Chipotle new meaning in April when the company launched Cultivate Next, its $50 million venture capital fund aimed at easing the pressure on the company. Tighten the profitability of the restaurant sector, addressing challenges ranging from labor shortages to rising food costs and attracting customers to spend more time dining in their stores.
“We are thinking about how to grow and scale the company through multiple lenses, noting that the fund represents an opportunity for Chipotle to grow from merely adapting,” said Garner. with changing technology to create it. “There’s the growth of the restaurant, there’s the growth and scaling of our digital business, and we also continue our mission to build a better world and change the way people think about it. Where does their food come from?”
Chipotle’s new venture fund could be a sign for investors as the restaurant sector continues to face significant economic difficulties. Analysts will be looking for specific examples of Garner’s first two points – new technology that promises to streamline and expand Chipotle’s operations – when Chipotle reports second-quarter results on July 26.
Chipotle has overall posted positive growth numbers since 2016 as the chain was dealing with food safety threats – it experienced nearly two years of system-wide sales growth. numbers from 2017 to 2020, according to Morningstar. But it’s not immune to today’s market downturn. While consensus estimates are calling for Chipotle to post second-quarter revenue of $2.24 billion, up nearly 19% year over year, and quarterly earnings of $9.04 per share, up 21%, the company’s stock is down more than 20% to date.
“The trouble is on the sidelines,” said Sean Dunlop, equity analyst at Morningstar.
While Chipotle and the restaurant sector have seen sales growth at comparable stores decline slightly, rising food, labor and utility costs combined with consumer trends Less out of the house “is holding back Chipotle’s P&L,” Dunlop said, noting that the squeeze will likely last until 2024. Owner-run chains like Chipotle and Starbucks could also perform badly. worse than franchisees because “they bear all the costs below current levels,” he added.
Another potential hurdle for Chipotle stock: worker solidarity. In early June, a Chipotle Mexican Grill in Augusta, Maine, filed for union elections, the first of the chain’s restaurants to join the recent organizing push across the United States that swept through the United States. companies from Apple arrive Starbucks.
A self-driving delivery robot provided the spark
Like every other VC investor, Chipotle is looking to tap into the ground floor of early-stage companies developing revolutionary technology. However, unlike typical VC firms, Chipotle is not looking for a specific return on investment within a specific time frame.
“Success for us is multifaceted,” says Garner. “It’s an opportunity for us to improve our business, and that improvement could turn out to be greater than what we’ll achieve in terms of tight financial returns on capital.”
The venture fund idea was launched last year after Chipotle invests in Nuroa SoftBank-backed startup that uses self-driving technology in Priuses and custom vehicles, to deliver groceries and other goods.
Domino’s tests the Nuro, an autonomous vehicle for pizza delivery, in Houston.
“We find a lot of traction there in terms of the synergies of culture, ideas, and innovation,” Garner told the Silicon Valley-themed Sand Hill Road podcast. in the May. Chipotle’s executive team found themselves presented with all sorts of ideas, Garner said, but had no formal channels to screen for opportunities as suppliers or partners.
Record venture investment in restaurant technology – including hardware and software for restaurant management, reservations, staffing, mobile payments and inventory management – reached more than $4 billion in 2021 and is on track to surpass that number this year. Hundreds of companies have expressed interest in the first round of Chipotle, which targets seed funds for B-chain startups.
Garner said Chipotle will announce the first selections in the coming weeks. Industry watchers say that Chipotle’s money expectations will follow tough spots in the industry.
Eric Symon, Vice President of the Center for Business Process Innovation at North America Panasonic System Solutions.
Symon is seeing a need for solutions like Panasonic’s temperature-controlled smart food lockers to prevent takeout and mix-up theft, which forces employees to re-fulfill orders. . He also sees a need for artificial intelligence applications to help restaurant managers forecast busy times of the day so they can better staff their stores.
To that end, Chipotle invested in an AI-powered labor management tool that analyzes dozens of variables like weather and available promotions to identify effective restaurant employees. than. It also implemented an AI-based training program that helped restaurant staff advance to management positions.
Labor of an automatic tortilla chip maker
When it comes to the kind of innovation Chipotle is looking to foster, Garner nods to Chippy, a robotic tortilla chip maker that saves time and labor costs by handling repetitive kitchen tasks repeat.
“It starts with, ‘how do we eliminate the humdrum of a worker standing at the fryer and basket of chips,’ said Garner. certified food safety. “It allows our crew to spend more time doing culinary tests, serving guests.”
Chippy can help Chipotle solve the labor shortage in the industry, but ultimately what the company is aiming for with the venture fund is to change the world food system.
“When you think about the environmental opportunities for food origins and how they are served, those are huge areas for technology to be accelerated and enabled,” says Garner, specifically pointing out. environmental-focused farming techniques in Europe. “Customers want to understand where their food comes from and feel good about what they’re shopping for.”
Sanjeev Krishnan, Chief Investment Officer at S2G Ventures, an eight-year-old trading firm, said: “Buying with sustainable farming methods will allow quick-service restaurant brands to have better affordability. In terms of ingredients, sourcing ensures funds dedicated to supporting sustainable and healthy food systems.
“More interestingly, these quick-service restaurants can bring an era of biodiversity into the food system – ours is boring,” says Krishnan. He added: “Only 15 crops provide 90% of the world’s food energy, with three types of rice, maize and wheat – accounting for two-thirds of these.
Investment in non-meat protein products has surged over the past few years, with Chipotle, McDonald’s, Burger King and Dunkin all recently experimenting with burger and hot dog alternatives on their menus. . Many brands are expanding plant-based experimentation into other product categories, and PitchBook Data tracks venture capital funding in a new category: 3D bioprinting, which involves printing living cells, growth factors and other biomaterials for the production of whole farmed meat, according to the company’s Q1 Foodtech Report. 3D food printer companies raised $185.7 million in VC funding last year, it said.
According to Dunlop, when it comes to investing in higher-risk emerging technology, Chipotle’s role can be thought of as much as other companies’ R&D costs.
“Nothing is off the table,” says Garner. “One of the things that [CEO Brian Niccol] has brought to our culture the idea that we have a lot of pride in what we do and very little ego. We can be proud of what we’ve done – like plant-based chorizo - but if someone has a good idea, we’d love to hear from them. “