Brian Niccol
Chairman and Chief Executive Officer at Chipotle Mexican Grill
Thanks, Ashish, and good afternoon everyone. Chipotle's third quarter results highlight strong momentum in our business, fueled by a multi-pronged growth strategy and a passionate team that's delighted to see more guests coming back into our restaurants. We continue to retain about 80% of digital sales but have now recovered nearly 80% of in-restaurant sales. While COVID impacts will likely persist for a few more quarters, we are hopeful that the worst is behind us and society can shortly return to a more normal environment.
Personally, I'm thrilled to welcome our restaurant support center leaders back to the office beginning in November, which will allow us to optimize creativity, camaraderie, and effectiveness, key elements that help make Chipotle unique and powerful brand.
For the quarter, we reported record quarterly sales of $2 billion, representing 21.9% year-over-year growth, which was fueled by a 15.1% increase in comparable restaurant sales. Restaurant level margin of 23.5% was 400 basis points higher than the 19.5% we reported last year. Earnings per share adjusted for unusual items of $7.02, representing an increase of 86.7% year-over-year. Digital sales growth of 8.6% year-over-year, representing 42.8% of sales and we opened 41 new restaurants, including 36 with a Chipotlane.
And I'm pleased to report that Q4 is off to a great start. These results highlight that our key strategies continue to resonate with guests and allow us to win today, while we create the future. While we regularly get asked, what's next, I believe our current growth drivers have plenty of runway and will be critical to us reaching our longer-term goal of 6,000 restaurants in North America with AUVs above $3 million and improving returns on invested capital.
To remind everyone, we're focusing on five key areas. Number one, opening and running successful restaurants with a strong culture that provides great food with integrity, while delivering exceptional in-restaurant and digital experiences. Number two, utilizing a disciplined approach to creativity and innovation. Number three, leveraging digital capabilities to drive productivity and expand access, convenience, and engagement. Number four, engaging with customers through our loyalty program to drive transactions in frequency. And last but certainly not least, number five, making the brand visible, relevant, and loved.
Let me now provide a brief update on each of these, starting with operations. Well-trained and supported employees consistently preparing delicious food and delivering excellent guest experiences are at the heart of our success. We're fortunate to have amazing employees at our restaurants who have stayed focused on safety, reliability, and excellent culinary, despite the dynamic and challenging environment. I've said it before and I'll say it again, our people are our greatest asset and I can't thank them enough for all their efforts. We are extremely proud of Chipotle's world-class employee value proposition that includes industry-leading benefits, attractive wages, specialized training and development, access to education, and a transparent pathway to significant career advancement opportunities.
We believe these efforts are helping to attract and retain great employees, which is more important than ever given the challenging labor environment we're all experiencing today. Over the past 18 months, we've made operational adjustments to adapt to our constantly changing environment in support of our in-restaurant business as well as our record-breaking digital business. As a result, we've had to allocate labor as needed among the different roles, including the DML and the frontline, depending on available staff to accommodate the needs of our customers and our restaurant teams. This flexibility has allowed us to keep our frontline open, given our ability to divert orders on the digital line as needed to overcome periodic staffing challenges. This is part of the normal business balancing that occurs at the discretion of on-site managers and has not had a material impact on our business in the past. This was through pre-pandemic and is more relevant now as dining room volumes recover.
The good news is that I believe we're finally getting back to pre-pandemic operations and I couldn't be more excited. We're fortunate to have a dedicated digital make line and a dedicated dining room serving line. Our frontline represented nearly 60% of our business or $1.1 billion of sales for the quarter. It is big and it is growing. We are committed to ensuring guests on the frontline get the customized meal they want, made with real ingredients, excellent culinary, and faster than anywhere else. We still have some work to do, but our goal is to provide exceptional throughput as speed of service is a foundational element of convenience that our guests truly value.
Therefore, we are committed to teaching, training, and validating the five pillars of throughput every day during every shift to ensure we meet our high standards and provide a great guest experience. While taking good care of guest is always a top priority, utilizing our stage gate process to continue innovating is critical to our growth. The great news is that Chipotle's delicious food that you feel good about eating, which creates an emotional connection with our customers and they love to see ongoing innovation from us. As a result, we introduced new menu items on a regular cadence as it helps bring in additional customers, drive frequency with existing users, and gives us an opportunity to create buzz around the brand.
Recently, we launched Smoked Brisket for limited time across all our U.S. and Canadian restaurants. Our culinary team spent the last two years developing the perfect Smoked Brisket recipe that is unique to our brand and pairs flawlessly with our fresh, real ingredients. This is our third new menu item this year, following on the success of our Cilantro-Lime Cauliflower Rice and handcrafted Quesadilla. Early customer feedback on this entree, which is expected to last through November, has been very positive and we're delighted to see an increase in both check size and transactions.
Quesadillas, which we launched as a permanent digital exclusive offering in March, continues to perform well and is also helping attract new customers to Chipotle. By the way, if you haven't had a chance to try the brisket quesadilla, you really are missing out. And we're far from being done. Plant-Based Chorizo is currently being tested in a couple of markets and our talented culinary team is in the early stages of developing other exciting menu items.
All that being said, our stage gate process is not limited to new menu innovations. We use it for many parts of the business, including development. As you know, we validated a new restaurant expansion in Canada earlier this year, impressive unit economics with AUVs and margins, equal to or above those in the U.S. led us to accelerate development in this market. We've opened one new restaurant in Canada year-to-date and have several more planned before year-end, including our first ever Chipotlane that's scheduled to open next week.
Similarly, we are now in the early stages of using this process to learn, iterate, and eventually validate expansion in Western Europe. COVID slowed our ability to execute several critical initiatives, however, with restrictions easing, we're making nice progress and have implemented some of our digital assets as well as begun to test alternative formats and explore new trade areas. The recent openings have exceeded expectations. So while we continue to view international expansion as a medium to longer-term opportunity, I remain quite optimistic about its future contributions to the Chipotle story.
A more near-term pillar of growth has been our ongoing digital transformation, which is helping Chipotle become a real food-focused digital lifestyle brand. During the third quarter, digital sales grew nearly 9% year-over-year to $840 million and represented 43% of sales. We're not surprised to see the mix moderate as the world continues to reopen. However, we're pleased to see our digital sales dollars continue to grow despite lapping tough comparisons. In fact, our year-to-date digital sales of nearly $2.7 billion are just slightly below the $2.8 billion we achieved during all of last year.
Digital is proving to be sticky as it's a frictionless and convenient experience that has been aided by continuous technology investments to improve operational execution, innovation, and the customer value proposition. As a result of the pandemic, many new consumers were introduced to Chipotle via our digital channels and are now using us for alternative occasions. The thing I love about having two separate businesses is that they serve different needs that will likely prove to be incremental and complementary over the long run.
This is reinforced by the fact that different guests are accessing Chipotle through different channels. Currently, about 65% of our guest use in-restaurant as their main access point, nearly 20% use digital as their primary channel, and the remaining 15% to 20% use both channels. We're encouraged by this dynamic as it gives us several future opportunities, including the ability to convert more of our in-restaurant guests into higher frequency digital users.
Not only are we pleased with the level of digital sales and overall mix, but we're also delighted to see that our highest margin transaction, digital pickup orders, is gaining traction. This channel represented slightly more than half of digital sales in Q3. As always, we're not being complacent and continue to look for ways to enhance convenience and access through alternate restaurant formats, digital-only menu offerings, and leveraging our large and growing loyalty program.
Speaking of the loyalty program, we're excited to have more than 24.5 million members, many of whom are new to the brand. This gives us a large captive audience to engage with and distribute content that promotes our values, as well as motivates our super fans. We continue to leverage our CRM sophistication by focusing a lot more on personalization and using predictive modeling to trigger journeys, primarily for new and lapsed customers. These personalized messages are more brand-related as opposed to offers or discounts, which is allowing us to optimize program foundation and economics. All these efforts, along with the use of enhanced analytics, are allowing us to consistently attract more visits from loyalty members than non-members. No doubt the loyalty program has moved from a crawl to the walk stage, and we still have a lot of room to grow.
Offering new ways to engage with Chipotle is essential to the ongoing evolution of our digital business. Our first enhancement was Rewards Exchange, which provides greater customization and flexibility to redeem rewards and allows guests to earn rewards faster. More recently, we announced Extras, an exclusive feature that gamifies Chipotle rewards with personalized challenges to earn extra points and/or collect achievement badges in order to drive engagement. As the program grows, so does our ability to provide sophisticated and relevant communications to our guests, which will ultimately deepen the relationship between members and the brand.
We are pleased with our progress to-date, but believe with ongoing investments and further leveraging of data-driven insights, we can get even better. Amplifying all the growth initiatives I've mentioned thus far are the collective efforts of the marketing team, which are designed to make Chipotle more visible, more relevant, and more loved. We believe that real food has the power to change the world and using custom creative across a wide variety of media channels that allow us to drive culture, drive difference, and ultimately, drive a purchase.
For example, we use numerous campaigns to stay relevant via important sporting events such as the basketball championships, where we hit $1 million worth of free burritos in our TV advertising. We also utilize social media, including our website, to authentically highlight real food for real athletes during the broadcast from Tokyo. And, of course, to celebrate the launch of Smoked Brisket, we offered an exclusive peek to our loyalty members prior to a full launch, supported by a media plan across online video, digital, and social media platforms as well as traditional TV spots. All of these helped attract new guests into the Chipotle family as well as increase frequency of existing users.
We're fortunate to have an innovative marketing team that wants to be a leader, not a follower, and our marketing organization is built on a culture of accountability that encourages new ideas, that's committed to experimentation, and is ruthless on measuring returns, and isn't afraid to pivot to different opportunities if they don't perform to our high standards. Every day this team is focused on driving sales today, while enhancing our brand for tomorrow.
Chipotle is committed to fostering a culture that values and champions our diversity, while leveraging the individual talents of all team members to grow our business, elevate our brand, and cultivate a better world. Our team has proven their ability to be resilient and successfully execute against macro complexities. Again, a huge thank you to our nearly 95,000 employees for all their efforts. As a result, I believe, we are better positioned to drive sustainable, long-term growth than we were before the pandemic, which makes me even more excited about what we can accomplish in the years ahead.
With that, here's Jack to walk you through the financials.
