Chipotle Mexican Grill, Inc. 2026 Q3 Earnings Call

Please go ahead. Hello, everyone, and welcome to Chipotle Mexican Grill's third quarter fiscal 2026 earnings call.

By now, you should have access to our earnings press release. If not, it can be found on our investor relations website at ir.chipotle.com. Additionally, supplemental investor information is available on our site as a reference for today's call. I will begin by reminding you that today's discussion includes forward-looking statements, including projections about our future business, financial, and other performance results. These statements are based on management's current business and market expectations, and our actual results could differ materially from those projected in the forward-looking statements. Please see today's earnings release and the risk factors contained in our annual report on Form 10-K and in our Form 10-Qs for a discussion of risks that may cause our actual results to vary from these forward-looking statements. Our discussion today will include non-GAAP financial measures.

A reconciliation to GAAP measures can be found via the link included on the presentations page within the investor relations section of our website. We will start today's call with prepared remarks from Scott Boatwright, Chief Executive Officer, and Adam Rymer, Chief Financial Officer, after which we will take your questions. With that, I will turn the call over to Scott.

Thank you, Christian, and good afternoon, everyone. We are pleased to see the momentum in our business continue in the quarter as we delivered revenue growth of 9.6%, once again including positive comparable sales and transactions. These results were fueled by our Recipe for Growth strategy as we continued to improve restaurant execution, deepen engagement with our Rewards members, bring new craveable innovation to the menu, and expand occasions. Additionally, our marketing connected with consumers in new and culturally relevant ways, including through our 100 Creators campaign. We've been opening a new restaurant nearly every day of the year and see tremendous opportunity to continue to do so even in our most dense markets. Our focus remains clear: strengthen what differentiates Chipotle, execute with greater consistency, and create more reasons for guests to choose us.

Broader consumer and industry headwinds may continue, but initiatives across our Recipe for Growth strategy are building and giving us more tools to win in any environment. We are still in the early stages of this work, and it is gaining traction. The progress we delivered this quarter gives us even greater conviction in our strategy and the multiple avenues we have to drive sustained growth at scale. In short, we are a category leader. We have a uniquely differentiated brand with strong fandom, and we believe much of our growth opportunity is still in front of us. Now I will walk through our progress across each of the five strategic pillars, starting with our first pillar, protecting and strengthening the core. Everything begins with running great restaurants.

For our guests, that means delicious food made from high-quality ingredients, generous and consistent portions, exceptional throughput, on-time and accurate digital orders, clean restaurants, and genuine hospitality. These are fundamental to our brand promise, and we remain focused on delivering them consistently throughout the day across every restaurant globally. Our high-efficiency equipment package is showing how targeted investments in our restaurants can drive better outcomes for our guests, our teams, and our business. Restaurants with HEEP are delivering hundreds of basis points of comparable sales uplift, improvements in guest satisfaction and taste of food scores, and over 2 additional entrees during the peak 15-minute period. HEEP is now installed in over 1,700 restaurants, and we continue to work toward approximately 2,000 restaurants by year-end.

HEEP is designed to simplify morning prep and grill operations, improve culinary consistency and flavor, reduce menu outages, and help our teams deploy more effectively during peaks. Importantly, we continue to reinvest the labor efficiencies created by the equipment back into our restaurants, giving our teams greater capacity to focus on throughput and hospitality. Throughput remains a key focus and one of the most important ways we believe we can improve the guest experience and drive incremental transactions. When we have the four pillars of throughput in place, our teams can move guests through the line faster while creating more opportunities to engage with them in a genuine and hospitable way. We have been focused on Linebacker and Expo deployment for the past several quarters and have made great progress on execution.

We are now expanding our focus to drive consistent execution across all four pillars, including Mise en Place and Aces in their Places, which is happening in fewer than half our restaurants today. We fully recognize the importance of exceptional throughput and know this is our strategic advantage. While we have made progress, I know we can be better. We will be emphasizing this evolution in Q4 so we are well prepared for the seasonal ramp in 2027, and we enter the new year with the momentum necessary to be great. At the same time, we are reinforcing accountability around hospitality and execution. I attended our team director conference during the quarter, and this year's agenda was focused on being brilliant at the basics that bring guests back time after time.

Preparing exceptional food is central to this, and Jason Kidd, our Chief Operating Officer, had a simple message for our teams, "Run to the food. Taste it every time and ensure it's delicious for our guests." That focus is already paying off, with Taste of Food scores up nearly 1 point year-over-year. We are proud of that progress, but just like throughput, we know we can be even better. Great execution starts with great leadership in the restaurants, and we continue to optimize general manager and apprentice deployment to ensure our busiest day parts are supported. These efforts are collectively leading to the better outcomes we are seeing in operational metrics, and we have made meaningful progress, but we know there is more opportunity ahead. Our goal is to deliver the Chipotle experience with consistency in every restaurant, every day.

Turning to our second pillar, modernizing our business through technology and digital innovation. Our goal is straightforward: Use technology to make our teams more effective and make the Chipotle experience easier, faster, and more rewarding for our guests. Under Chief Digital Officer Arlie Sisson's leadership, we are building the capabilities to accelerate progress, and Arlie is strengthening her team with the addition of AI and architecture leadership to help accelerate innovation across the business. We are still in the early stages of what AI can do. One example is our AI-enabled Cook to Needs tool, which entered pilot during the third quarter and is now rolled out to over 500 restaurants. The tool, which we plan to roll out nationally early next year, uses AI-based demand forecasts to recommend the right amount of freshly prepared food at the right time.

This helps reduce manual data entry, increase prep efficiency and readiness, reduce waste, and support better deployment and more consistent culinary execution. Alongside this, we are also developing Autocado, our in-restaurant AI assistant, and see the potential to expand its scope and assist general managers with operational insights and actionable coaching that can help our team leaders make better decisions in real time. Our proprietary digital make line interface, which we call Chipotle Kitchen, is also currently rolling out to our restaurants, with plans to reach several hundred by year-end. The technology is designed around improving the outcomes that matter most for our teams and guests. Order accuracy, on-time fulfillment, speed, ease of integrating new menu items, and guest satisfaction. We will continue scaling to the entire system throughout 2027.

In April, we revamped Chipotle Rewards and are continuing to see strong results from the program, with our highest comps consistently coming from loyalty occasions. In-store enrollment has also remained elevated, driving our active membership to reach over 24 million guests for the quarter, and we continue to see significant opportunity to deepen engagement with members. Summer of Extras was a strong example, with 6.8 million Rewards members opting into the program, an increase over last year. Members earned 25 million badges and completed approximately 600,000 challenges. Most importantly, our loyalty share of sales increased to over 33%, our highest ever. This is exactly what the program is designed to do, deepen engagement and give guests more reasons to visit Chipotle. We also continue to progress with our frictionless rewards pilot.

Around 30% of our guests use Apple Pay in-store, and they will be able to automatically earn points while paying, eliminating the need for a separate reward scan. It's a simple change, but an important one because it reduces a key friction point while also supporting throughput. We will advance the test through stage gate in Q4 and plan to take the technology across the enterprise in 2027. Longer term, we see a significant opportunity for technology to make rewards increasingly personalized, improve in-restaurant identification, and help us more effectively re-engage lapsed members. Our third strategic pillar is evolving our brand messaging, accelerating menu innovation, and expanding the occasions where guests choose Chipotle. At the center of this work is the value proposition that has defined Chipotle for more than three decades.