Scott Boatwright
Interim Chief Executive Officer at Chipotle Mexican Grill
Thanks, Cindy, and hello, everyone. Before I get into the details of the quarter, I know I speak on behalf of everyone at Chipotle when I say that we are grateful for Brian's leadership and for the transformation he led. Over the past several years, we've built a strong team with a great culture and had developed compelling and successful strategies together.
With that said, after leading our operations for the last seven years, I'm excited and honored for the opportunity to lead Chipotle as our Interim CEO. To start, there are three things I want to make very clear today. The first is that I'm extremely passionate about our brand and purpose. We are truly a special company that cares about the culinary heritage that Chipotle was founded upon, and our purpose of cultivating a better world resonates with our teams at all levels of our organization as well as with the guests we serve in our restaurants each and every day.
I'm also passionate about our people, and I strongly believe we have the best in the industry, both in our restaurants and at our support centers. Since joining Chipotle in 2017, I've had the privilege and responsibility of leading our restaurant teams as we have grown from under 2,300 restaurants to over 3,600 restaurants today, employing over 125,000 people. I can tell you firsthand how hard our teams work to provide our fresh, delicious and customizable culinary experience at accessible prices to millions of people every day. These exceptional people are the backbone of our great brand. And the third is that our strategy is not changing. I have worked alongside our talented executive team to craft and evolve our successful strategy, and we will continue to execute against it. This includes our long-term targets of expanding to 7,000 restaurants in North America, increasing our AUVs to over $4 million, and expanding our restaurant level margins and growing internationally.
Now before I dive into our five strategies, I want to run through our third quarter results. We had another outstanding quarter with positive transaction growth every month. We saw momentum build throughout the quarter as the impact from summer seasonality normalized and as we successfully launched smoked brisket, which is off to a fantastic start. For the quarter, sales grew 13% to reach $2.8 billion, driven by a 6% comp with over 3% transaction comp growth. In-restaurant sales grew by 18% over last year. Digital sales represented 34% of sales. Restaurant-level margin was 25.5%, a decrease of 80 basis points year-over-year. Adjusted diluted EPS was $0.27, representing 17% growth over last year. And we opened 86 new restaurants, including 73 Chipotlanes. The momentum in the business has continued into the fourth quarter with accelerating transaction trends, and we are maintaining our full year guidance of mid- to high single-digit comps.
Now let me provide an update on our five key strategies that have helped us win today and will grow our future. These strategies include running successful restaurants with a people-accountable culture that provides great food with integrity while delivering exceptional in-restaurant and digital experiences. Amplifying technology and innovation to drive growth and productivity in our restaurants, support centers and in our supply chain. Sustaining world-class people leadership by developing and retaining diverse talent at every level. Making the brand visible, relevant and loved to acquire new guests and improve overall guest engagement. And expanding access and convenience by accelerating new restaurant openings in North America and internationally.
Let's start with running successful restaurants and our progress on throughput. We have mentioned this in the past, but it's important to say it again, throughput is a core focus for Chipotle because it is the outcome of a strong operational engine that delivers a great experience for our guests and teams. And execution in our restaurant is improving as we continue to build our throughput muscle. Last quarter, we began concentrating our efforts on the expo position as it is a critical pillar of throughput. As a reminder, this is the crew member between salsa and cash, who helps expedite the order assembly and payment process. Restaurants with an expo in place are averaging five incremental entrees in their peak 15 minutes.
We are often asked why it's so challenging to execute this key pillar of throughput. Well, the crew member responsible for the Expo position may be doing other tasks like prep, which prevents them from being properly deployed. In late August, we made a decision to have the management duty deployed to the Expo position during peaks. This has helped to improve the percentage of restaurants with an Expo in place to over 60%, compared to just over 50% last quarter. It has also helped to drive accountability, improve communication with the guests, and ensure we are properly ringing up each order.
While we are making great progress on executing the four pillars of throughput, we still have work to do. Of the restaurants that do not have the four pillars in place, we are finding that often our crew members are still prepping food during peak periods. The fact is preparing our delicious food is a lot of work and requires strong culinary skills. Our teams are beginning prep at 6 a.m. or 7 a.m. in the morning to be able to deliver our food on time when we open. This includes slicing and dicing produce, hand-mashing avocados to make our delicious guacamole, frying our chips every day, and grilling items like the heated veggies and Adobo chicken on the plancha.
In addition to coaching and training around throughput, we are also exploring ways to make the process easier on our teams while ensuring we are maintaining or improving upon our high collage [Phonetic] standards. This brings me to technology and innovation. We now have several initiatives in stage gate that could help to improve the prep and cooking process and drive a better experience for our teams. Two that I'm particularly excited about are the dual-sided plancha and the produce slicer. As we mentioned last quarter, we are in the process of rolling out the dual-sided plancha to an incremental 74 restaurants, which will be complete by the end of next month. And as part of the stage gate process, we are now evaluating implementing the dual-sided plancha into new restaurant openings, as well as retrofitting existing restaurants, and we'll have more to share on this early next year.
Additionally, over the last year, we have been testing a produce slicer. In our restaurants, slicing and dicing vegetables like jalapenos and bell peppers is one of the most time-consuming and repetitive tasks. It would be an understatement to say our teams are excited about this new tool. In fact, at our all major conference in March, nearly 5,000 managers and above restaurant leaders gave it a standing ovation. The new produce slicer drives improved efficiency, which will allow our teams to complete the prep process on time in every restaurant, resulting in better deployment at peak and better throughput. And it also improves our culinary by delivering consistent cut sizes. I'm excited to share that we are beginning to roll out the new produce slice in all restaurants, which should be complete by next summer.
Beyond these two initiatives, our augmented make-line by Hyphen and avocado, which cuts, course and scoops avocados were installed into their first restaurants for pilot testing during the quarter. These are both highly customized technologies that could provide big unlock for us in the future. We have already received a lot of learnings on both innovations from our crew and our guests that will be used for future iterations.
As you can see, we have a number of initiatives underway, and I envision significant back-of-the-house changes in the near future that will drive efficiencies and improve the consistency of our culinary and our restaurants. This will enable our teams to focus on and execute the four pillars of throughput better than we ever have, and deliver an exceptional experience for our guests in-restaurant every day. Let's shift to world-class people leadership. In addition to innovation that helps to better enable the preparation of our delicious food, we are also rolling out a new technology platform across all restaurants that will make the hiring process simpler, faster and more automated. The new AI hiring platform automates the communication and scheduling between applicants and our general managers, reducing the amount of time it takes to hire an employee for an in-restaurant position by as much as 75%.
The automation of this administrative task will allow our GMs to spend more time coaching and developing their teams and providing excellent hospitality for our guests. And it also gives us a competitive advantage against the other restaurant chains in the high-volume hiring market because we can hire talent faster. As I mentioned earlier, I'm passionate about our people and building a strong culture that recruits, retains and grows the very best. And I'm thrilled to share that Chipotle was ranked first among 400 of the largest publicly traded companies in the American Opportunity Index of Best Places for High School Graduates to Start a Career. The rankings were based on how well the company hires entry-level employees, promotes from within, and prepares them for opportunities when they leave.
The very best benefits we offer our teams is our career advancement opportunity. We have so many stories of crew members who have started at Chipotle and grown within the organization, resulting in life-changing careers, including several to the position of regional vice president, overseeing hundreds of restaurants and $1 billion-plus business. In fact, a team director out of the Chicago region has one of these inspiring journeys. She came to the U.S. at the age of seven with her parents and brother as refugees and at the age of 18 she started working at Chipotle as a crew member for her first job out of high school. She has advanced within Chipotle to become a top-performing team director and now is responsible for 61 restaurants or almost $200 million in sales each year. She clearly demonstrates and understands that developing and growing future leaders is what makes Chipotle a special company. My favorite part about her journey is that through her financial success at Chipotle, she was able to help her mom retire, which she views as her biggest accomplishment.
I could not be prouder to be part of an organization that prioritizes our people and their growth. And the exciting part is that as we look to grow to 7,000 restaurants in North America and expand internationally, we will be adding hundreds of new restaurant leadership roles each year. And we will continue to pursue our goal of promoting over 90% from within. The future is very bright at Chipotle.
Now turning to marketing. I have to take a moment to acknowledge our marketing team for their outstanding work over the years in making Chipotle more visible, more relevant and more loved. Our brand continues to lead and gain momentum in many categories like quality of ingredients, quality of food for the money, and healthy and nutritious. This is a result of a strong marketing strategy and brand campaigns like Behind the Foil, which showcases our Chipotle teams preparing our fresh delicious food. The campaign is certainly resonating well, and we will continue to evolve it and find new ways to put a spotlight on what differentiates Chipotle, which is our food, our people, our purpose and our values.
Turning to menu innovation. Our limited time offers continue to surpass our expectations. Our guests have been craving the return of smoked brisket for three years, and it's off to a very strong start, driving incremental transactions and spend. As we have mentioned in the past, given the limited supply of responsibly raised beef, it was a huge cross-functional effort to bring back this fan favorite, and we anticipate it will last through the fourth quarter. We also have been testing Chipotle Honey Chicken, which is our adobo chicken season with savory Mexican spices and finished with a touch of pure honey.
Similar to Chicken al Pastor, it is simple to execute in our restaurants and absolutely delicious. This has been one of our most successful tests to date, both in early sensory testing as well as in the broader two market tests we are currently running in Nashville and Sacramento. I'm delighted to share that Chipotle Honey Chicken has made its way through the stage gate process and is ready to be rolled out in the future. Finally, coming up this week will be our annual Burrito promotion. This year, our marketing team found another creative way to lead culture as we collaborated with Spear Halloween and launched a new collection of Chipotle costumes, inspired by popular memes on our social channels, which has generated some of our highest social engagement this year.
Now moving on to our final strategy, which is to expand access and convenience both in North America and internationally. In North America, our development team made great progress smoothing the cadence of openings with 185 new restaurant openings year-to-date, which compares to 149 at this same time last year. We remain on track to open between 285 and 315 new restaurants this year, which will mark another record for us. As we look at 2025, we anticipate opening between 315 and 345 new restaurants, with at least 80% including a Chipotlane.
In Canada, our new restaurant openings continue to be outstanding. And in the third quarter, we entered another new market with our first restaurant in Edmonton, which broke an opening day record for North America. We will surpass 50 restaurants in Canada next month, which is a huge milestone. Our unit-level economics and returns remain on par with the U.S., and we will continue to accelerate growth in Canada in 2025.
Turning to Europe. Under the new leadership team, we are beginning to see promising results. We have better aligned our culinary and menu to the North American standards, and we are in the process of fully unlocking the functionalities of our operational tools to better manage labor and food costs. Additionally, similar to our successful strategy in Canada, we are rolling out local and digital marketing initiatives, which are building brand awareness and bringing more guests into our restaurants. The recent performance gives us confidence that we can begin to build our restaurant pipeline for the future, and I'm optimistic that Europe will be a sizable growth opportunity for Chipotle over the coming years.
Finally, I'm excited to share that our first restaurant in Dubai opened earlier this month. The restaurant is absolutely beautiful and located along the beachside boulevard of Jumeirah Beach. This is the third restaurant we have opened this year with our partner, Alshaya Group. All three restaurants are exceeding our expectations, and Chipotle is one of the top-performing brands and Alshaya's portfolio. This is further strengthening our confidence that Chipotle's responsibly sourced, classically cooked real ingredients resonates across geographies. We are targeting to open a second restaurant in Dubai early next year and plan to accelerate growth with Alshaya Group in 2025.
In closing, I want to thank our restaurant and support center teams for another great quarter driven by strong transaction growth. I always say that at Chipotle we are either directly serving our guests or serving someone who is serving our guests. And it's important that as a team we continue to focus on exceptional food, exceptional people and exceptional throughput. This will drive great execution in our restaurants that will enable us to continue down our very long run rate for growth as we expand to 7,000 restaurants in North America and grow internationally.
And as we make our way down this path, I strongly believe Chipotle will become a purpose-driven global lifestyle brand. With that, I'll turn it over to Jack.
