Chipotle Mexican Grill, Inc. (CMG) Earnings Call Transcript & Summary

Hi, everyone. I'm Andrew Charles, Cowen's restaurant analyst, and I'm very pleased to be joined today by Curt Garner, Chief Technology Officer; and Ashish Kohli, Global Head of Investor Relations of Chipotle Mexican Grill for a keynote fireside chat today. I've got a number of topics that I plan to cover, but I want to make this as interactive as we can in the virtual environment. So for those in the audience who have a question, please feel free to enter into the chat. I'm going to relay them anonymously on your behalf.

Curt and Ashish, thank you guys so much today. What I wanted to start off with was perhaps just on the holistic digital ecosystem. And Chipotle digital sales have boomed from about 20% of sales pre-pandemic to 50% in most recent quarters. And this obviously afforded the organization a robust level of data collection. So can we talk about what decision-making capabilities has the data collection afforded Chipotle that was not possible before the pandemic?

Yes. And by the way, thanks for having me, Andrew, and everyone. It's a pleasure to be here and join you. Certainly being 2 years into our rewards program, having over 20 million people enrolled is above the expectations we had when we first set out to launch the program. And as we look at the evolution of digital at Chipotle, we started with this basis of building a point of access that afforded people the ability to enter transactions, drive transactions through different channels. And I think the rewards program is enabling us to take another step towards a platform of engagement. And engagement platforms mean a lot of things, but they're certainly more sticky in the minds of consumers than pure transactions. And an example I would give is the experience you get when you're booking an airline flight versus the experience that we're building within digital, where we're able to do some things now on the digital platforms that are difficult to do in the restaurants. So think of our Lifestyle Bowls. Our Paleo or our whole life bowls is an example of that, something that's easy to order online or in the app and for us to get exactly right in the restaurant, a little bit more difficult to make those choices as you're going through the frontline. As people enrolled in the rewards program, we've learned more about them. And certainly, it's helped us be smarter and more personalized with our consumer journeys and our offers and promotion engine. It's also given us the ability to understand what's really important to people as they engage with a brand like ours, our ideas around Real Foodprint and the ability to understand one's environmental impact by choosing Chipotle over other options was certainly part of those learnings. We're also seeing how people are reacting to round up to real change and how we're all partnering together to give back to the communities that we serve. So we're getting this information both from the rewards program, but also understanding how people are engaging on the digital ecosystem as a whole. And I think you'll see more things come in terms of innovation as a result. And certainly, our most recent exciting announcement with the launch of quesadillas as a digital-only exclusive.

Thanks, Curt. That's a great start. The average Chipotle is running a very impressive $1.2 million of sales in the digital make-line. And curious if we can contextualize the opportunity around how much capacity does the digital make-line have. For instance, is there enough infrastructure in place with the tech stack to support a doubling of current volumes to $2 million of digital sales when we look at the traditional non-Chipotle locations?

Yes. We still have peak capacity volumes within our digital make-line. And we have some restaurants in the portfolio that are seeing volumes well in excess of the $1.2 million. That gives us a lot of confidence that there's existing capacity, not only at peak, but frankly, other day parts throughout the day. We've been very careful with how we've constructed the digital platform. For context, we do about 400 releases a year on our digital properties. And each one of those addresses what we internally call the 3Ss; so scale, stability and security. Everything has been architected on the cloud. We've got very robust capabilities to scale on demand as transactions increase, so what helped us go 400% increase in transaction volumes literally within a week as we went into the pandemic. That continues to be an area of focus for us, and I'm confident that we've got the right plan in place.

That's great. And then what's your view that between catering, digital carry-out and digital delivery that you can see the 50-50 sales mix between digital and front make-line experienced in the last 3 quarters hold to this side of the pandemic? Perhaps said differently, how sticky are these sales on the digital side?

Well, we're certainly still seeing the sales to be sticky, even as dining rooms have recovered. We've got places where the front dining room has recovered 60% or so its pre-pandemic sales levels. And we're holding on to 80% of the digital sales in those restaurants. I think it's a combination of new consumers trying this for the first time. I also see in our data that people that have tried us in the last year are going to different occasions and different order modalities as well. I think it's helpful to look at this sort of as the whole pie. We want sales in all of our channels to increase. All of our channels are profitable in terms of their individual channel. Certainly, we saw catering, as an example, go down during the pandemic as people were encouraged not to gather. We saw groups order more on digital for small groups. So entrée counts went up. I think that's led to this 50-50 split. I don't really know that we have a target for what the percentages will be. We're more focused on getting back and beyond the 2.5 million average unit volumes that we've talked about before. And we certainly see in the data that we have now that digital continues to grow. So our digital sales in the first quarter run rate was better than they were last year even as dining rooms are reopening. So I'm confident that it's not going to go back to the 20% level it was at when we entered the pandemic. I can't tell you yet as it's early in the recovery what the absolute percentages will be.

Got you. That's helpful. And then have you observed any quantifiable behavior of digital customers around visitation? For instance, Starbucks, where you were before Chipotle, has said that their Starbucks Rewards customers visit them 3x more. Chipotle has said there's a roughly $5 average ticket observed in digital orders -- ticket lift in digital orders. But what has been the experience with the increases in visitation?

Starbucks has had their program live longer than the 2 years that we've been in. So we're still having people that entered a few months ago start maturing to the program. Certainly, in aggregate, the data that we have indicates that people that are in the rewards program visit more often. They spend more in terms of total dollars. And I think, importantly, the time frame between visits is smaller, and we can quantify this in terms of understanding a specific consumer's behavior using tokenized credit card data before they joined rewards if they were an existing customer and after. So there's certainly before and after effect that we can track there. It's a little harder to make those corollaries for brand-new customers that we haven't seen before. But what we can do is compare their visit patterns with brand-new customers that we're seeing in the frontline, and we still see all those indicators of greater total spend and shorter times between visits. I'd caution that in the last year or so, the in-store data has been a bit skewed because of the pandemic. So I think that will normalize as everything else normalizes.

Curt, are you able to see or are you able to derive that the newest customers to Chipotle rewards are exhibiting similar behavior at the onset versus the customers that joined a year or 2 ago? Or is it just too lumpy within the data because of the pandemic?

Yes. I think those are -- that's an accurate observation. In some cases, I think we've seen it accelerate, but part of that's been we're getting smarter and better as we go as well and being more effective at how we understand trends and behaviors earlier and creating more crafted and personalized experiences to help accelerate that engagement.

Very good. And then Chipotle, like most restaurant companies, have observed elevated ticket and depressed traffic levels over the last year because of pandemic. How do you envision that normalizing? Do you think it's going to be proportional? Or will check or traffic start to normalize perhaps before the other?

Yes. It's a little hard to say right now. Certainly, we see higher average entrees per transaction in the digital channel. So one could observe that if those customers are coming back individually into the frontline of a restaurant that ticket would be impacted negatively and transactions would be impacted positively. What we're seeing right now is that it's still occasion-based. So I think what we're experiencing early on is that people that tend to order in small groups for their families for dinner at home, as an example, are starting to come back into our restaurants for lunch. And they may be alone when they're doing that. Yet they're not necessarily dropping their group ordering behavior for dinner either. So it's more around an additional occasion than it is necessarily transference between ticket and transaction.

I see. Okay. And then Chipotle was obviously very focused on digital ordering growth before the pandemic. But throughout the industry, digital ordering growth and the rate of growth was obviously the story of 2020 just given the acceleration seen during the pandemic. And so if we think about digital ordering growth being a theme of 2020, what's the technology story of 2021 and 2022 in your view? What are these elevated levels of digital now permitting Chipotle to do?

Yes. It's a really good question. I think it's usually never one technology that sparks a transformation or a change. It's a mash-up of the things. And I guess I'd use the example of Facebook. Would Facebook be as successful as they are without all the progress that's been made on cellular technologies and then the progress that has been made on having apps beyond phones? Or would any of those technologies have had the same breakthrough without Facebook? So I think it's going to be a combination of things, frankly, and not just one. Where I think people need to focus right now is to understand if all of their production went to digital in their restaurant, are they prepared to deal with the blend of those transactions as the frontline opens up? So the operators that are using chits that are coming in digitally to make orders in their traditional kitchen or serving line are going to need to understand how to deal with capacity issues as people are now standing in those lines. We've developed Smarter Pickup Times capabilities. Obviously, the digital kitchen being a separate restaurant within a restaurant to segregate those transactions has been part of our vision. I think if I had to pick one, there's some combination of awareness and logistics software that people are going to need to understand and invest in to figure out how to serve both things at the same time. Most restaurants have either done one of them really well, like they were predominantly a drive-through or a front counter business or they were predominantly a ghost kitchen that did digital and delivery only. Now they're going to be potentially all 3, and they need to figure that out.

Very good. Can you elaborate a bit on Chipotle journeys, which is basically the lumping together of customers who exhibit similar behavior and tailored marketing to these groups. And specifically, now that you have these groups identified, what are the aspirations for 2021 and beyond?

Yes. There's a delicate balance in how we're creating our journeys. And at the highest level, you can say that there are a common set based upon your recency or newness to your first Chipotle experience and how you're matriculating, if you will, through your lifetime with us. So welcome journeys are a very common thing. The journeys that encourage people to make a second visit or establish habits are a part of the portfolio. And then if we see somebody lapsing or we think that we've lost them, there are journeys that we've created for those experiences as well. As time goes on, frankly, we're just -- we're creating more. We've got the ability to create additional cohorts around characteristics of customers that we can then craft specific journeys around. And you can think of that in terms of dietary preferences. You can think about that in terms of the time of day that people visit and whether or not they bring a friend. And also things like customer recovery. If somebody had a bad experience, there's a specific recovery journey that we're working on as well on how to make that whole and reengage people in the brand. The balance is you can over-personalize and spend a whole lot of time creating cohorts that aren't necessarily as impactful and meaningful. Just like our stage-gate in our restaurants, we're working through stage-gates on the journeys as well, where we're creating A and B test groups of people that have similar characteristics to see how people respond to curated journeys that we're creating.

That's helpful. Maybe just one more question just around the digital ecosystem, then we can shift to Chipotlanes. And maybe this is just a creative exercise, but if you had unlimited resources, what's perhaps one technological improvement at guest-facing that you'd implement for Chipotle tomorrow?

Yes. Back to that theme of it's usually not just one. That's hard for me to nail down. I think that the combination of a few things are going to be compelling and instrumental in the future of this space. Edge computing, I think, 5G networks and some combination of machine learning and artificial intelligence can fundamentally change the architecture of how we're building these experiences. You can think of the leverage we can attain at Chipotle with over 2,800 physical restaurants that are all company-owned, using those as computing points within those technologies to deliver very immersive, feature-rich experiences without dealing with latency and some of the issues that we have kind of in the industry now with how things have been architected around the cloud. So some combination of those things, I think, are going to really help people rethink and recreate experiences. Virtual reality is going to become more of a reality because of those technologies. I think that will influence how people create experiences as well.

That's great. Let's shift now to Chipotlanes, which are the digitally enabled drive-throughs that Chipotle has roughly 200 around. For Chipotles that are older than 1 year, or older than 2 years, have you observed same-store sales that materially outpaced the overall base? And what I'm really looking to learn is that, is there a behavioral learning curve behind these stores that manifests the tailwind to same-store sales as the functionality is better understood after 12 to 24 months?

Yes. So a Chipotlane when it opens achieves average unit volumes of an established regular Chipotle. So right out of the gate, their sales volumes are higher. And they're materially higher in digital order ahead and pickup, which is our most profitable channel. So those 2 factors combined certainly have us continuing to be optimistic about the number of Chipotlanes that we're building. And we're seeing, from a comp basis, that continue into year 2. So they start at higher volumes, and they comp on a percentage basis at or above other existing restaurants within the same age class. So they don't just start with a pop and then kind of level out. They're continuing to grow as they mature.

And I guess, Curt, is there further enhancements on the way for this? Can these be better marketed via Chipotle Rewards? Is there a plan at some point that when you sort of scale maybe there's an opportunity for national marketing? It just seems like you guys are really designing drive-through on a blank sheet of paper for 21st century and that this is something that early adopters are totally going to get and hope for, but there's an opportunity for the masses to really understand the power and the need behind these. And so I guess, is there plans to kind of dedicate more marketing towards these? Or is the guests kind of figuring it out for themselves?

Yes. I think you described it well. We've been pleasantly surprised at how people have kind of got it, that it's the drive-through of the future, and adopted Chipotlanes so quickly. When we first experimented with it, we had the obvious concern around 40 years of habituation of people expecting the drive-through to perform in a specific way and us going in a different direction. Certainly, scale is going to help those marketing efforts. We've already leaned into it in digital where there's specific iconography, our restaurant finder and within other elements of the digital experience to alert a guest that it's a Chipotlane. And I think you'll see more regional or national advertising as a result of that density as it grows.

That's great. So far, Chipotle has done about 5 conversions of traditional Chipotles into a Chipotlane. And one question we get a lot from investors is what is the gating factor of increasing Chipotlane retrofits and relocations. I know that, obviously, conversations with landlords are kind of dominating the pace of this. But is there a way to streamline the effort beyond the current status of store-by-store conversations? Because I would imagine that if you could snap your fingers and make every store Chipotlane tomorrow, you probably would.

Well, yes. And some of the restaurants that aren't Chipotlanes that are more in line or traditional formats, obviously, continue to do very well and be popular in the communities that they serve. So not every restaurant, obviously, is a good candidate for Chipotlane conversion and even a relocation, depending upon the specifics of the trade area and what kind of real estate could be available in that trade area that would afford a Chipotlane. I think the gating factor for all our growth is that we're being thoughtful about it and want to make sure that we've got trained apprentices that are ready to be general managers and general managers that are ready to be field leaders as they take on these multimillion-dollar businesses. So we're being careful as it relates to cash and noncash returns and ROI and the investment necessary for conversion and relocation. And then we'll continue to do that, at the same time be opportunistic. Certainly, landlords are getting it now and understand what a Chipotlane is and the popularity. So we're getting a lot of traction in those discussions and lots of sites presented to us before that I think historically might have been presented to other brands. So excited about how that's all going.

Very good. And then as Chipotlane penetration has grown, I know of a comment a year or 2 ago is that this really wasn't impacting cannibalization at surrounding stores. Has there been any change in that? Have you observed either a higher or lower level of cannibalization than maybe there was previously as you've scaled a bit?

Yes. So far, we have seen none. So that continues to hold. We're not seeing cannibalization from local stores from the Chipotlane relocations that we've done or any of the new construction that we've done.

Great. And then lastly, on new store prototypes, what are your early learnings so far from the digital-only store at West Point? Are sales performing to the level you expected?

Yes. The West Point restaurant continues to perform within expectations, a little bit better than expectations. And I think, importantly, we're learning a whole lot from that format about how to run it and how to market it and what people expect when they come in, which was the primary -- at least one of the primary purposes of building that restaurant and going through the stage-gate experimentation with the new concept. So from an expectations perspective, I think we're right on point.

Very good. Does this kind of lend confidence to you guys that we could see more digital-only stores opened at this point where Chipotlane perhaps wouldn't make sense? And I guess, have you guys opened a second one yet? Or is there still just one out there?

Yes. Just that one. We've got some prototypes that we're working through right now on a variety of different restaurant formats. I think for the rest of this year and into next year, the majority of the restaurants that we build are going to be Chipotlanes with a traditional frontline. We're not ruling out other formats that we might roll out and test and accelerate based upon their results. Certainly, that's how we got to Chipotlane in the first place. We built a few prototypes, had the learnings and then rapidly accelerated them into our portfolio. So enthusiastic to see about how some of these other prototypes might perform.

Yes, Curt, that was my next question. I was curious if you're going to see a more material mix of development for Chipotlanes with either no or limited seating, but it sounds like test first and then kind of figure it out from there. So that answers that.

Yes. With real estate pipeline being 16 to 18 months, to kind of get to the tipping point one way or another on the majority, there's some work that needs to be done in advance and some time to play out with the existing commitments that we've made.

Got it. Yes. Very good. Chipotle is testing Carside Pickup. What are the early learnings from this? And specifically, are you seeing this incremental -- are you seeing this as an incremental guest to the brand?

Yes. It's early days in the stage-gate process with the test. I think we're still in a learning mode with the recency in terms of whether or not this is attracting new guests, and if it's existing guests, what channel they're switching from. We're very curious to learn how the experiment performs as dining rooms open back up to see what modalities people prefer in that situation. Is carside is still something they're looking for? Is it more pickup business, more in-store dining business? So kind of early in that process. But as I mentioned earlier, order ahead and pickup continues to be our quickest-growing channel. And carside could be a way that we service that channel like a Chipotlane, but not quite like a Chipotlane. And that's what we're experimenting right now. But pickup time at a Chipotlane window averages 12 seconds. It's a different experience when you pull into a parking lot, find a place to park, let us know you're there and have your food brought out. That's what we're trying building around.

Yes. Curt, can you expand on that a little bit, how carside plays into this pulling strategy? If I played devil's advocate and carside really takes off, I mean, do you need to focus on Chipotlane relocations and retrofits going forward?

Yes. The data is going to lead us to whatever those decisions are. There are challenges in the carside model that we still need to learn our way through, particularly parking at peak, which is alleviated certainly through a Chipotlane and how those orders are sequenced and how guests approach the window. You can imagine in a smaller footprint or a busy parking lot having 20 carside orders at lunch would be difficult for both the consumer and the crew. So again, early days in all of that. I couldn't project that it would -- carside would ever be replaced by Chipotlanes -- I'm sorry, that Chipotlanes would ever be replaced by carside.

Andrew, I was just going to say, I think, one of the things that's fairly consistent, right, no matter what topic you're asking about, is this concept of stage-gate, right? I think this has been really a critical success factor for Chipotle, whether you're talking about something on the digital side, development side, menu innovation. And as Curt said, we'll let the data kind of drive where things go. Three boxes that we typically look for when we go to a stage-gate is what's the customer response, what's the operational impact and then, obviously, what's the financial benefit to Chipotle.

Yes, Ashish, that's a great point. Some of the investors certainly appreciate about the fact that when you guys implement new initiatives, they've definitely been tested thoroughly. So there's proof-of-concept and investors feel confident whether that is menu innovation, digital innovation, what have you. I think that's a very good point. If I could turn now to the labor environment, it's no secret across the industry right now staffing is incredibly tough, that it's just hard to get people to fill roles. And I want to talk to you guys about some of the technological enhancements that you've made at the store level that increased productivity, as you guys look at transactions per labor hour, that allow you to pay higher wages to folks that you guys announced 2 weeks ago, but with the offset of more efficient staffing.

Well, yes, certainly, we've made investments on the digital side of the business. So we've talked about our dedicated Digital Kitchen. There are technologies within that kitchen that are screen-based that show our crew members what an entrée contains in it by lighting up the appropriate bin. And we found that to be much more effective than asking somebody to print and keep track of a bunch of chits that are coming out, both in terms of speed and accuracy. There's certainly labor savings that are associated with that. But I think there's things behind the customer experience that are important as well. The Smarter Pickup Times and our ability to load balance based upon staffing levels in our restaurant has been a critical enabler for us. We've done things around prep, where we're using printers now to create labels for our food items as they're prepped in the morning, where those used to be handwritten. That's been a time changer for the restaurants. We've made investments in inventory technologies as well that will take time out of a manager's day in terms of receiving inventory. We've got some things like that within stage-gate right now. And we're piloting some new labor scheduling software as well that we're very encouraged about the earlier returns on that, both in terms of predictive modeling as well as easing the administrative burden for our managers as it relates to the task of creating a schedule. All of those things compound upon themselves. They allow our managers to be more focused on customers during peak and training and developing crew on non-peak and away from some of the administrative activities. And you're going to continue to see us lean into those types of investments.

Curt, just on that last point on the easy scheduling. And I know before the pandemic Chipotle had talked about a labor scheduling tool to help that's more predictive and more forward-looking to really help find efficiencies as well as make staffing easier. Is that still feasible? Or are the benefits somewhat constrained by fair work weeks enacted throughout the country?

Well, I think it's absolutely still feasible. But the smarter you are about what's going to happen in the future, the more effective you are creating a schedule that meets customer demand. And that may mean 3 or 4 weeks out for fair work week, and it may mean 2 weeks out in other places. But still, having that data and being smarter about the future will always position us to be more on our front foot.

Got it. And is this labor scheduling tool, is this going to have a bigger impact in 2021? Or would you think about it more as a 2022 initiative?

The way the rollout schedule looks like and what I expect is going to be the learning curve involved, I think it's more 2022 before we start seeing all the benefits.

Very good. Okay. And then prior to the pandemic, Chipotle indicated digital make-lines require about 3 to 5 employees versus 6 to 8 from the house, suggesting about 50% less variable labor for digital versus non-digital. Can you talk about the staff requirements for digital transactions versus non-digital transactions today, given that, that business is now more evenly split in the restaurant between digital and front make-line?

Yes. I think that model still holds. A digital make-line at peak in some of our busier restaurants may have more than 3 people working it. And likewise, a frontline at a very busy restaurant may have more than 5 people working it. We've got not only the people that are serving the food, but expeditor, linebacker roles that we put into our labor deployment as volumes grow. So it's a bit of a store or restaurant-specific equation. But in general, it takes usually about 2 people less to work the digital make-line than it does the front counter.

Okay. Is there any rule of thumb, like we think about kind of talking about the time back to what you were saying earlier about you're doing $1.2 million in volumes in that digital make-line today. That's going to go up over time. I mean, how fixed is the labor such that, okay, we need to see X dollars of volume or X number of transactions before we consider adding another body? Has it become that programmatic? Or is it pretty fixed with the labor, such as the 3 to 5 folks in the back of the house could handle a large increase in volume or transactions?

Well, certainly, the labor scheduling program as we implement it and get smarter about the future is enabling us to be more proactive with what our staffing needs are. And it's that combination as well as all the work Scott's team is doing in operations around streamlining how we operate that is creating the magic, if you will. So he's instituted specific roles for prep in the morning versus customer service in the morning. I think that's helped. So it's the technology and business process, if you will, combined that I think is going to help get us there.

Got you. Okay. Very good. We've got a few minutes left and getting a few e-mail questions in, but would certainly encourage any other questions, feel free to submit any questions in the chat. I wanted to shift now over to Nuro. I thought this is something fun that recently came about, that it's making a splash in the industry. And for those that don't know, we talked a bit about this before in our Domino's fireside chat, but it's basically an autonomous vehicle. It's a rover that will make deliveries. And Domino's -- it came on to investors' screens really as a partner of Domino's first, but they're now actually advertising it in the commercials today. And then was followed by an equity stake in March from you guys. And I was just curious, can you talk about the genesis of the partnership and how it came together?

Yes, sure. So we're excited about Nuro, and it's always fun to meet founders and companies that share a vision around access and creating technologies that elevate human experience. The notion of cobotics and how tech and people work together to create something is kind of right in the wheelhouse of what Chipotle is investing in. So an introduction was made between a few of us on the Chipotle leadership team and the founders of Nuro. And we started having the conversation, I would say, initially, as whether or not a typical supplier partnership would be made. And the more we talked to them, we saw the congruence of the values. And the more they shared with us how they can use our expertise in building their brand and experience, the more we thought it made sense to take an equity stake as well.

Very opportunistic. Jack said during his CNBC interview that we'd likely see Nuro delivering Chipotle food sometime in the next 5 years. And if we work backwards from there, what needs to happen before you can pilot Nuro in stores? Is the biggest bottleneck here regulatory? Or is it cultural?

Well, yes, at this point, Nuro is still on a journey of getting approval from specific Bureau of Motor Vehicle departments and jurisdictions around the country. And this technology is new to go through that process. And some jurisdictions have figured out how to adopt their processes for these types of approvals. And I think others are at another place in their journey. So that's certainly going to be one of the criteria we look at. But I don't think there's going to necessarily be a cultural barrier. As Ashish said, we'll learn through the stage-gate process as we put this out to test. Notionally, having some fixed level of delivery capacity in our restaurants, we think, is a good idea. And for those that choose it, Nuro would be a great alternative. And you custom-build vehicles that allow hot items to stay warm and cold items to stay cool is certainly more bespoke than the average aggregator delivery vehicle. And there's cost benefits to the consumer not tipping. I think there'll be a lower overall delivery charge for that type of service still yet to be seen. But there's some tradeoffs. Like it's not going to knock at your door. So if you're mobility limited, it may not be a great option to go and meet that type of vehicle at the curb. But these are all the things that we're going to need to learn.

Very good. Just 1 or 2 questions before we wrap up. Back in August of last year, I think you guys started with a 7% price increase on your delivery orders relative to the in-store orders. That was bumped up to about 13% or so in October. And then in April, you guys went up to 17%. And curious about what went on in the stage-gate process that allows you the confidence to increase these prices? And is there an opportunity -- I know Chipotle obviously looks to be very judicious with pricing to reinforce the value positioning, where you guys obviously serve a lot of food for the price you pay -- that the consumer pays. But is there an opportunity as well as we go up from here, that in an effort to really help minimize the margin effort of delivery that perhaps some of the price increase could come as well?

Yes. I do think we're in the fortunate position of still having a lot of pricing power. We remain a great value for farm-to-table, real ingredients and cooking techniques and the amount of food. I think you said that very well. The price increases that we took in the delivery channel were in response to, I think, a general recognition from consumers and the industry that delivery is a premium service that costs more. And I think people kind of get that hiring someone to drive to their residence or drive to a retail establishment and then drive to their residence has a cost associated with it. And the stage-gate that we did on the delivery pricing indicated that there was little resistance to those types of prices. We're going to just continue to learn and monitor and I think, as Ashish said, see where the data takes us and what makes sense in terms of pricing and margins.

And Andrew, I know we've shared this publicly before, but Jack has said that now at a 17%-type delivery menu price increase, we've brought the delivery economics on a dollar basis, essentially in line with the frontline. There's still a small margin impact, but we're probably going to pause here and kind of evaluate how things progress. And remember, we have other avenues on the margin side, right? I mean, you touched upon a couple of them earlier, the labor efficiencies. And then we also have further supply chain efficiencies. So we have other levers that can also help us on the margin side beyond just continuing to improve delivery economics.

Absolutely. That's very helpful. Guys, only have a couple of seconds left, so I think we're in a good place to wind it down. Thank you both for your insights and time and perspective today. Really appreciate it. And thank you, everyone, for listening as well.

Thanks, Andrew. It's great seeing you again.

Likewise. Stay well. Thanks, guys. Bye.